Before incorporation of your business, you'll need to know what structure your business will be in. There are 3 types of main business entities in Singapore: Company, Sole Proprietor and Partnership.
Companies can be private or public companies. A private limited company is one whereby the shares are held by fewer than 50 shareholders and are not available for sale to the general public. This is the most common form of business entity in Singapore.
Sole proprietorship is the simplest business entity in terms of administration and compliance. However, it is not a separate legal entity, so there is no separation of personal assets from the business. This means that as the sole proprietor, you will have unlimited liability and creditors can come directly after you for your business liabilities.
Lastly, partnership is another business entity similar to sole proprietorship in terms of administration and compliance but allows for capital injection from other partners. Similarly, a partnership and all its partners are also regarded as a single legal entity. This means that partners have unlimited liability and are personally liable for the debts of the partnership and any other legal action taken against it. In addition, partners are also personally liable for the actions of other partners in the business. There are 3 types of partnership forms in Singapore:
A general partnership (up to 20 partners) in which partners are personally liable for the debts of the business and each partner can be held responsible for the actions of another partner.
A limited partnership whereby limited partners are only liable up to their investment in the partnership. The drawback is that limited partners are unable to make management decisions on behalf of the partnership.
A limited liability partnership is a hybrid between a partnership and a company. It allows the partners the flexibility of a partnership while also having a separate legal entity. This is common for the professional services industry (e.g. lawyers and architects).
The differences of the business structures will influence your business incorporation decision. If you need help, please reach out to us!