Article: Legal Structures for Businesses

Different legal structures are appropriate for different scenarios and considerations. This table sets out the possible options of legal structures and significant factors or considerations relating to each.

Blueprints. Legal structures

 

 

Sole Proprietor Company Partnership Limited Liability Partnership (LLP) Limited Partnership (LP) Business Trust
Legal Status § Not a separate legal entity from the individual owner running the business.

§ Owner exposed to unlimited liability, e.g. debts of the business. Owner personally liable, exposed to bankruptcy.

§ Can sue or be sued in individual owner’s name.

§ Can own property if the owner has legal capacity.

§ A separate legal entity from its members / shareholders and officers e.g. directors.

§ Members, shareholders, officers not personally liable for company’s debts. Only the company exposed to insolvency.

§ Can sue or be sued in its own name.

§ Can own property in its own name.

 

§ Exempt private company: 20 members or less; no corporation holds beneficial interest in the company’s shares.

§ Private company: 50 members or less.

§ Public company: more than 50 members.

§ Not a separate legal entity from the individual owners running the business.

§ Partners exposed to unlimited liability, e.g. debts of the business. Partners personally liable, exposed to bankruptcy.

§ Can sue or be sued in firm’s name.

§ Cannot own property in the firm’s name.

§ There must be at least 2 partners. No maximum number of partners.

§ Partners can be individuals or corporate bodies.

§ A separate legal entity from its partners.

§ Partners not personally liable for LLP’s debts. Partners exposed to limited liability. Only the LLP exposed to insolvency. Individual partners personally liable for their own acts or debts, not for other partners’ acts or debts.

§ Can sue or be sued in its own name.

§ Can own property in its own name.

 

§ There must be at least 2 partners: at least 1 general partner and 1 limited partner. No maximum number of partners.

§ Partners can be individuals or corporate bodies.

§ Not a separate legal entity from its partners.

§ General partner has unlimited liability. General partner personally liable for LP’s debts.

§ Limited partner has limited liability. Liability limited to agreed contribution.

§ Cannot own property in LP’s name.

§ At least 1 manager ordinarily resident in Singapore who is at least 18 years old, if general partner(s) are not ordinarily resident in Singapore.

§ Not a separate legal entity

§ It is a trust, with a trust deed.

§ Both legal title and assets in the company.

§ Trustee holds the legal title to assets.

Registration Requirements § Age 18 years or above.

§ Singapore citizen/Singapore permanent resident / EntrePass holder.

§ If the owner is not resident in Singapore, he must appoint an   authorised representative who is resident in Singapore.

§ Self-employed persons must top up their Medisave account with the CPF Board before they register a new business, become the owner of an existing business name or renew their business registration.

§ At least one shareholder.

§ At least one director ordinarily resident in Singapore.

§ If a foreigner wishes to act as a local director of the company, he can apply for an EntrePass from the Ministry of Manpower.

§ Age 18 years or above.

§ Singapore citizen/Singapore permanent resident / EntrePass holder.

§ If the owner is not resident in Singapore, he must appoint an   authorised representative who is resident in Singapore.

§ Self-employed persons must top up their Medisave account with the CPF Board before they register a new business, become the owner of an existing business name or renew their business registration.

§ At least two partners, who can be individuals who are at least 18 years old or body corporate (company or other LLP).

§ At least one manager who is an individual ordinarily resident in Singapore who is at least 18 years old and not disqualified under the Companies Act.

§ At least one general partner and limited partner. Both can be individuals (at least 18 years old) or body corporate (company or other LLP).

§ At least one manager ordinarily resident in Singapore (at least 18 years old) if all the general partners are not “ordinarily resident” in Singapore.

§ Register with the Monetary Authority of Singapore (MAS), not ACRA.

§ Trustee manager which is a corporation.

§ Unit holders own beneficial interests in the trust.

Formalities & Expenses § Quick and easy to set up.

§ Easy to administer and manage.

§ Registration cost low.

§ Less administrative duties.

§ Must renew registration before the expiry date.

§ Higher cost to set up and maintain.

§ More formalities and procedures to comply with.

§ Must appoint a company secretary within 6 months of incorporation.

§ Must appoint an auditor within 3 months after incorporation unless the company is exempt from audit requirements (exempt private company).

§ Annual Returns must be filed.

§ Statutory requirements for general meetings, duties of director/company secretary, share allotments, etc.

§ Quick and easy to set up.

§ Easy to administer and manage.

§ Registration cost low.

§ Less administrative duties.

§ Must renew before the expiry date.

§ Quick and easy to set up.

§ Fewer formalities and procedures to comply with as compared to a company.

§ Registration cost is low and fewer regulatory duties to adhere to than a company.

§ No statutory requirement for general meetings, share allotments, etc.

§ Only an annual declaration of solvency must be lodged by the manager stating whether the LLP is able or not able to pay its debts during the normal course of business.

§ One time registration.

§ Quick and easy to set up.

§ Easy to administer and manage.

§ Registration cost low.

§ Less administrative duties.

§ Must renew registration before the expiry date.

§ Higher cost to set up and maintain.

§ More formalities and procedures to comply with.

§ Trustee-manager must appoint a secretary as any company would.

§ Trustee-manager must appoint auditor within 3 months of registration of business trust.

Registration Fee (payable to ACRA) § $115 ($15 name application fee and $100 registration fee) for 1-year registration.

§ $175 ($15 name application fee and $160 registration fee) for 3-year registration.

§ $315 ($15 name application fee and $300 incorporation fee). § $115 ($15 name application fee and $100 registration fee) for 1-year registration.

§ $175 ($15 name application fee and $160 registration fee) for 3-year registration.

$115 ($15 name application fee and $100 registration fee). § $115 ($15 name application fee and $100 registration fee) for 1-year registration.

§ $175 ($15 name application fee and $160 registration fee) for 3-year registration.

§ $2,000 for application for registration of business trust.
Applicable Tax Rate § Profits taxed at individual owner’s personal income tax rates. § Company’s profits taxed at corporate tax rates. § Profits attributed to individual partner taxed at personal income tax rates. § Profits attributed to individual partner taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation). § Profits attributed to individual partner taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation). § Profits attributable to business and assets held by trustee taxed at corporate tax rate.
Continuity § Exists as long as the owner is alive and continues business. § The company, as a separate legal entity, does not cease to exist if one or more of its shareholders die.

§ Its corporate existence lasts as long as its shareholders decide it should. A company’s life is usually perpetual.

§ Ownership of a company can be transferred and additional shareholders can be appointed.

§ Exists as long as the partners continue business. § The LLP has a legal personality separate from its partners.

§ The LLP has perpetual succession.

§ Exists as long as the partners continue business and all the general partners remain in the partnership.

§ If there is no limited partner, LP will be suspended and converted to a firm registered under the Business Names Registration Act.

§ Once a new limited partner is appointed, the registration of the LP will be restored.

§ Exists as long as unit holders continue the trust.
Closing The Business § By owner or authorised representative by filing a Notice of Cessation of Business Registration.

§ By Registrar – if the registration has expired and has not been renewed.

§ Winding Up – voluntarily by members or creditors; compulsorily by the High Court upon the application of members, creditors, liquidators, etc.

§ Striking Off the company from the Register.

§ By owner or authorised representative by filing a Notice of Cessation of Business Registration.

§ By Registrar – if the registration has expired and has not been renewed.

§ Winding Up – voluntarily by partners; compulsorily by the High Court upon application of partner, creditors, liquidators, etc..

§ Striking Off from the Register.

§ By general partner – cessation of LP.

§ By Registrar – if the registration has expired and has not been renewed.

§ Winding up under provisions of trust deed, at direction of unit holders or by the court on application of trustee-manager, director of trustee-manager, unit holder or creditor of business trust.

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