Types of Business Entities

Incorporation of companies is under the purview of the Accounting and Corporate Regulatory Authority (“ACRA”) and is governed by the Companies Act 1967.

Requirements to incorporate a Singapore company

A Singapore company must have:

• At least one director who is a natural person and is ordinarily resident in Singapore [includes a foreigner who has been granted an employment pass or entrepreneur pass].

• At least one secretary who must be a natural person having his or her principal or only place of residence in Singapore.

A company limited by shares is the most common type of business entity and it may be incorporated as:

• a private company (up to a maximum of 50 members); or

• a public company (more than 50 members).

Minimum share capital of a company is S$1.

Timeline for incorporation of Singapore company

• Reservation of proposed name of company – usually within 1 to 2 business days but may take up to 2 weeks if proposed name is referred to the Referral Authorities for review and approval. For example, certain activities such as banking, insurance, trust companies and financial services – require registration with / licensing by the Monetary Authority of Singapore.

• Incorporation process – Once the proposed name is approved by ACRA, the incorporation process usually can be completed within 2 business days upon the submission of all relevant information and documents to ACRA.

Registration of branches of foreign companies is under the purview of the Accounting and Corporate Regulatory Authority (“ACRA”) and is governed by the Companies Act 1967.

A branch is an extension of the foreign company and is not a separate legal entity. It is usually not considered tax resident in Singapore.

Requirements to register a Singapore branch of a foreign company

Name of the Singapore branch must be the same as the head office with the inclusion of “Singapore Branch” and written approval needs to be obtained from ACRA.

A branch must have at least one person resident in Singapore to act as its authorised representative. The authorised representative must be a Singapore citizen, or a permanent resident, or a foreigner holding a valid employment pass.

Application process to set up a branch of a foreign company in Singapore

Once the proposed name of the Singapore branch has been approved by ACRA, the process to set up the branch may take up to one week.

Information and documents on the foreign company to be submitted include:

• Name of foreign company;

• Date and country of incorporation;

• Capital structure;

• Principal activities; and

• Names of countries with branches.

The VCC is a corporate structure for investment funds constituted under the Variable Capital Companies Act 2018 (“VCC Act”) which took effect on 14 January 2020. The VCC complements the existing suite of investment fund structures available in Singapore and it is a type of legal vehicle which is tailor-made for collective investment schemes (“CIS”). Incorporation of VCC is under the purview of the Accounting and Corporate Regulatory Authority (“ACRA”).

Some of the features of a VCC are:

• A VCC must have at least one director who is ordinarily resident in Singapore (e.g., Singapore citizens, Permanent residents or holders of EntrePass / Employment Pass) with a local residential address and at least one director who is either a Qualified Representative (as defined under the VCC Act) or a director of its fund manager.

• VCCs consisting of Authorised Schemes must have at least three directors including one independent director. An Authorised Scheme refers to a CIS as defined under Section 2(1) of the Securities and Futures Act 2001 (“SFA”) that is constituted in Singapore and authorised by MAS under Section 286(1) of the SFA.

• A VCC must have at least one secretary who is a natural person and ordinarily resident in Singapore.

• A VCC must be managed by a Permissible Fund Manager regulated by the MAS.

• A VCC can be set up as a single standalone / non-umbrella fund, or as an umbrella fund with one or more sub-funds, each without legal personality and having segregated assets and liabilities from the other.

Timeline for incorporation of VCC:

• Reservation of proposed name of VCC – usually within 1 to 2 business days but may take up to 2 weeks or more if the proposed name is referred to the Referral Authorities (such as MAS) for review and approval.

• Incorporation process of VCC – Once the proposed name is approved by ACRA, the incorporation process usually can be completed within one week upon the submission of all relevant information and documents to ACRA.

A sole proprietorship is a business that can be owned and controlled by an individual, a company or a limited liability partnership.

A sole proprietorship can be registered with the Accounting and Corporate Regulatory Authority (“ACRA”) under the Business Names Registration Act 2014. It may be registered for a period of one year or three years and it can be renewed within 60 days prior to its expiry date.

A foreigner needs to have an employment pass or entrepreneur pass to register a sole proprietorship.

The legal status of a sole proprietorship: –

• It is not a separate legal entity from the business owner;

• The business owner has unlimited liability (i.e., the business owner is personally liable for all the debts and losses of the sole proprietorship);

• It can sue or be sued in the owner’s name.

No accounts are required to be filed with the Registrar of Businesses, ACRA. As a sole-proprietorship is not a separate legal entity, its profit is taxed as personal income of the business owner.

a. General Partnership

A partnership is a business owned by at least 2 partners. A partner can be an individual, a company or a limited liability partnership.

The maximum number of partners in a general partnership is 20, except for professional partnerships which are established for the purpose of carrying on any profession which may be exercised only by persons who possess the qualifications laid down in written law for the purpose of carrying on that profession (e.g. lawyers registered under the Legal Profession Act 1966).

A partnership can be registered with the Accounting and Corporate Regulatory Authority (“ACRA”) under the Business Names Registration Act 2014. It may be registered with ACRA for a period of one year or three years and it can be renewed within 60 days prior to its expiry date.

The legal status of a partnership:

• It is not a separate legal entity from the business owners;

• The partners are personally liable for all the debts and losses of the partnership;

• It can sue or be sued in the partners’ names.

No accounts are required to be filed with the Registrar of Businesses, ACRA. A partnership is not charged to tax as an entity although a partnership tax return must be filed with the Inland Revenue Authority of Singapore. The adjusted income of the partnership is allocated amongst the partners and included in their respective individual income tax returns.

b. Limited Liability Partnership

A Limited Liability Partnership (“LLP”) is a “body corporate” which is formed upon registration under the Limited Liability Partnerships Act 2005. An LLP allows a business to operate and function as a partnership and yet have the status of a separate legal person and further, each partner’s liabilities are limited to the amount they had put into the business.

An LLP must have:

• At least one manager who is a natural person. A partner can also be a manager; and

• At least two partners who are natural persons or bodies corporates.

Notwithstanding LLPs being regarded as bodies corporate, for income tax purposes, an LLP is treated as a partnership and not a separate legal entity.

c. Limited Partnership

A Limited Partnership (“LP”) registered under the Limited Partnerships Act 2008 consists of:

• At least one general partner who is liable for all debts and obligations of the LP incurred while he is a general partner of the LP; and

• One or more limited partners who will not be liable for the debts and obligations of the LP beyond the amount of his agreed contribution. Limited partners are not allowed to participate in the management of the LP nor bind the LP.

An LP does not constitute a separate legal entity and the tax treatment is similar to that for a general partnership.

Foreign entities from the manufacturing, international trading, wholesale, trade and trade-related business sectors that are keen on exploring the viability of doing business in Singapore may establish a Representative Office (“RO”) in Singapore. An RO does not carry on business but undertakes research, feasibility studies and liaison activities on behalf of the foreign company.

The application for registering an RO can be submitted to Enterprise Singapore’s website.

RO as a temporary establishment

An RO of a foreign entity is a temporary establishment and it may operate in Singapore for a maximum of three (3) years from its commencement date, provided that its status is evaluated and renewed by Enterprise Singapore annually. If the foreign entity decides to continue its presence in Singapore after 3 years, it is required to register a subsidiary or a branch with the Accounting and Corporate Regulatory Authority (“ACRA”).

The RO is not required to keep accounts or file tax returns except in respect of its employees’ remuneration (Form IR8A).

Restrictions on RO activities

Broadly, an RO may not: –

• engage in any trading (including import and export) / business activities directly or on behalf of the foreign company;

• lease warehousing facilities;

• lease its office to other establishments for a fee;

• enter into or sign business contracts, issue invoices / receipts, open / receive letters of credit, sign contracts on behalf of the foreign company, or provide services for a fee.

The types of joint venture commonly used are:

• An incorporated company (see Section on “Singapore Incorporated Company” above) where the joint venture parties are shareholders.

• A contractual joint venture where the business is treated as a partnership (see Section on “Partnership” above) and the joint venture parties are taxed as partners.