Choose a business structure
Step 1: Choose a business structure
Whether you’re running the business on your own or with partners, choose the structure that best suits you. The most common are sole proprietorship, partnership and company. Each structure has its own benefits and considerations.
Here are the five different types of business structures:
A sole proprietorship is run by only one business owner and it is the simplest type of business structure. While a sole proprietor has complete control over the business and its operations, he is also personally responsible for all debts and legal actions against the business.
A Partnership is similar to a sole proprietorship, except it is formed by two or more partners (capped at 20).
An LP is a partnership between a minimum of two partners, with at least one general partner and one limited partner and does not have a separate legal entity from the partners. A general partner is responsible for the actions of the LP and is liable for all its debts and obligations. A limited partner is not liable for the LP’s debts and obligations beyond his agreed contribution, provided he does not take part in the management of the business.
An LLP is a type of business structure in which two or more partners incorporate an entity separate from themselves. A partner of the LLP cannot be held personally liable for the actions of any other partners. Thus, every partner is personally responsible for any liabilities that arise from their own actions.
A local company is a business entity incorporated in Singapore. A company has the right to own property, has perpetual succession and can sue or be sued in its own name. There are 4 different types of companies:
- Private company limited by shares
- Exempt private company
- Public company limited by shares
- Public company limited by guarantee
The most commonly chosen type in Singapore is the Private Limited Company. Click here to understand more about the different types of companies.
How to choose your business structure
Here are some questions to help you decide:
- What is the nature of my business?
- How many owners will there be?
- How much capital will I invest?
- What risks am I prepared to take?
- What is my long-term plan for the business?
- What are the pros and cons of the different structures?
- What are my business needs?
- Is the business structure easy to set up, manage and close?
There will be different filing obligations depending on your business structure. Find out more about Annual Filing with ACRA and Tax Returns Filing with IRAS.
Not sure which business structure to choose?
There are 2 ways to find out which business structure suits you best:
- Use our e-Adviser for Business Structure to get recommendations on the suitable business structure based on your business preferences.
Go to e-Adviser for Business Structure
- Download a Business Structure Comparison Table to find out the differences amongst the different business structures.