How does each Business Entity Works?

In Singapore, you have a great deal of flexibility in choosing the business vehicle in which you wish to do business. Here is a basic guide to the different business entities that you can choose:

Sole proprietorship

A sole proprietorship is a business that is owned by a single owner who can be an individual or company. The sole owner has complete control over the company and can conduct business in any legal action that he wishes. He also has unlimited personal liability because there is no legal distinction between the sole proprietor and the sole proprietorship. Under the Business Registration Act, the sole proprietorship must be registered with ACRA (Accounting and Corporate Regulatory Authority) before it can commence business unless it falls within the exempted categories in Section 4 of the Act. A foreign company cannot register a sole proprietorship unless it is itself registered under the Companies Act.

Partnership

A partnership is a business entity that is formed with a minimum of two partners and a maximum of 20 partners. If there are more than 20 partners, the partnership must be registered as a company under the provisions of the Companies Act. Anybody that meets the definition of a business entity may set up a partnership. Thus, individuals and limited companies may set up a partnership because they meet this definition but not another partnership. A foreign company may set up a partnership if it is registered under the Companies Act. Partnerships must be registered with ACRA under the Business Registration Act. Every partner has individual and unlimited liability for all the obligations of the partnership.

Limited Liability Partnership (LLP)

This is a uniquely flexible business entity where the owners can operate like a partnership while creating a new separate legal entity similar to a body corporate. The LLP has the right of perpetual succession, the right to acquire and hold property and the right to sue and be sued in its own name. Partners in an LLP do not have unlimited personal liability for the obligations of the LLP other than that arising from their own wrongful acts. A partner in an LLP is any person who has been admitted to partnership in accordance with the LLP agreement. The partner may be an individual, a local company, a foreign company or another LLP.

Limited Partnership (LP)

A Limited Partnership is a business entity that has at least two partners namely one general partner and one limited partner. An LP is not a legal entity that is separate from the partners and does not enjoy the benefits of a limited company or an LLP. Any individual or company can be a partner in an LP and the local manager is not required unless all the partners are resident outside Singapore. The general partner has unlimited liability whereas the limited partners, if they do not participate in the management, have liability that is limited to the extent of their agreed investment.

Private Limited Company

A Limited Company is a business entity that is registered in Singapore under Chapter 50 of the Companies Act. The company is a separate legal entity and has the right of perpetual succession, the ability to acquire an own property on its own name and to sue and be sued in its own name. A Private Limited Company can only have a maximum of 50 shareholders and the liability of each shareholder for the obligations of the company is restricted to the capital that he subscribes.

Exempt Private Company (EPC)

An EPC is a Private Company that has a maximum of 20 shareholders and no corporation can directly or indirectly hold a beneficial interest in the shares of the EPC. An EPC is allowed more liberal operating conditions and can claim privileges such as an exemption from audit.

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