setup-llc – CLA – Singapore

Type of Business Entities & corporate structures in Singapore

There are several types of companies that our Clients can set up in Singapore, the most common ones being the private limited company (LLC), branch office and representative office.

The private limited company (Pte. Ltd.)

Setting up a private limited company in Singapore is the most common strategy adopted by entrepreneurs, which is abbreviated as “Pte. Ltd.”. This company type is functionally equivalent to the LLC in other jurisdictions, with shareholders’ liability being limited to the amount unpaid on their shares;
Thanks to the relaxed rules on opening a private limited company, requiring only one shareholder, one resident director, a company secretary, a registered address and no minimum share capital, foreign investors overwhelmingly favour the Pte. Ltd. when entering the Singaporean market. This entity can engage in any type of commercial or industrial activity, and there are no restrictions on foreign investment;
Singaporean private limited companies may have up to 50 shareholders. If there are likely to be either i) more than 50 shareholders or ii) regular share transfers, then an unlisted public limited company is a better option;
This entity can be incorporated within one week without the need for our Clients to visit Singapore or contribute any share capital. However, at least one of the company’s directors must be resident in Singapore;
Local government is welcoming new entrepreneurs to start a business in Singapore. New startups will enjoy significant tax relief at the first 3 years of tax assessment and subsequently can be qualified for a partial tax relief. For the details please refer to IRAS webpage.

Best uses:

General purpose – A private limited company fulfils the needs of almost every application for doing business either within or outside Singapore. These entities have low administrative requirements and can be turned to almost any use as long as share liquidity is not required. These attributes of a Singapore LLC makes it ideally suited for use as a subsidiary or as an entrepreneurial vehicle.

The private limited company’s flexibility also means that it can be used in the following ways:

Special Purpose Vehicle (SPV)

SPVs can be used to i) hold designated assets on behalf of its investors while insulating the shareholders from liability and ii) raise funds from the market;

Holding company

This vehicle is used to hold and manage long-term investments including debt, real estate, and shares in other businesses in a tax-efficient manner;
Holding companies derive their income primarily from dividends, interest payments and rental fees, depending on the types of assets held;
Singaporean companies can be used as private wealth vehicles to manage family assets. Visit CLA Consultants Group’s page on family wealth vehicles to learn more and compare different structures that can be used to run a family office.

Branch office

Foreign companies may do business in Singapore without setting up a separate legal entity, although they must register with the Accounting and Corporate Regulatory Authority (ACRA) to do so. Doing business in this manner is known as establishing a branch office in Singapore;
A branch office can conduct business only within the scope set by the parent company. A Singapore-based branch can invoice local customers, sign sales contracts and receive income from customers;
As an extension of the foreign company without its own legal personality, a branch does not have limited liability. Any liabilities incurred by the branch are therefore attributed to the parent company. Consequently, using a branch introduces greater risks to your business;
Branch offices may only be registered by foreign corporations, as stipulated by Singapore’s Companies Act;
Branches are treated as non-resident for tax purposes. This means that they do not benefit from Singapore’s double taxation avoidance treaties, nor the tax incentives for new companies.

Best uses:

Not recommended – Although there are some limited advantages to using branches in other jurisdictions, including: i) being a cost-effective way to incorporate business in Singapore, and ii) the branch profits earned can be repatriated without paying any taxes. However, CLA Consultants Group recommends incorporating a local company rather than establishing a branch in Singapore. Since the company has no minimum capital requirement, limited liability, and allows 100% foreign ownership in all fields, the traditional benefits of a branch do not apply. No time is saved in registering a branch either, as incorporating a Singaporean company can be done under a week.

Representative office

A representative office can be used if a foreign company does not intend to carry on revenue-generating business activities in Singapore. Annual filings are simplified since the lack of revenue means that taxes do not need to be filed or assessed;
These entities cannot make direct sales. Instead, they may only carry out “auxiliary activities”, such as i) promoting the business of the parent company ii) market research iii) after-sales support or iv) research & development;
The scale of a representative offices’ operations is limited by a rule requiring fewer than five members of staff;
Representative offices’ limited scope brings with them a limited lifetime, as they may only operate for up to three years before being required to convert to a branch;
New foreign businesses may not set up representative offices in Singapore, as the law requires that the foreign entity should i) have an annual sales of more than US$250,000 and ii) have existed for at least three years;

Best uses:

Market research – If your business wishes to send a small delegation of staff to investigate the Singaporean market, a representative office is a good short-term solution with simpler financial reporting than for a company. For other activities or long-term establishments in Singapore, a company is usually preferred due to greater flexibility in the activities it can carry out and more freedom to generate value for the business.

Free Zone Company

Our Clients also have the option of setting up a free zone company in one of the nine available free zones. For this purpose, we can assist our Clients to incorporate a simple LLC and then help them obtain an operating permit from the free zone authority;
The free zones provide massive advantages including: i) storage facilities to both local and foreign companies; ii) no permit requirement for the transshipment of non-controlled goods; and iii) no custom duties and GST on products imported in a free zone;
For more information about this business entity, refer to our Singapore free zones page.

Best uses:

International Trade – A free zone company is generally used by trading companies that need to import products into Singapore for further processing and then export the finished goods to other countries.

Singapore fast solution

This solution is recommended for our Clients who need an immediate company setup in Singapore. For such Clients, CLA Consultants Group presents its fast turnkey solution which includes i) a company registration number ii) an already approved multicurrency corporate bank account number and iii) a business address;
For more information, refer to our Singapore shelf company/turnkey solutions page;

Best uses:

The Singapore fast solution is recommended for our Clients who immediately need a local company to close deals or sign contracts in Singapore.

Limited Liability Partnership

An alternative to the limited liability company is the limited liability partnership (LLP). Like the LLC, this entity offers limited liability benefit to its partners. Furthermore, this entity can issue contracts, lease property and sign legal documents in its own name;
An LLP can be setup by 2 partners with a minimum capital of US$1. However, the LLP will be required to appoint at least 1 manager who is ordinarily resident in Singapore;
An LLP will not be subject to annual corporate income tax. However, the income will be taxed in the hands of the partners. Consequently, if the partners are individuals, personal income tax will be payable or if they are corporate entities, corporate income tax will be payable;
For more information, refer to our webpage on LLPs.

Best uses:

Professional services – An LLP is generally recommended for firms providing professional services including accounting & tax services, consulting services and legal services.

Partnership

Some of our Clients may wish to form a general partnership (GP) in Singapore. Unlike an LLP, partners of a GP are personally liable for all losses and debts of the partnership;
An alternative option to the GP and LLP will be the limited partnership (LP). An LP comprises of at least 1 general partner (who is personally liable for all losses and debts) and 1 limited partner (whose liability is limited to the extent of his capital contribution);

Best uses:

Not recommended – GPs and LPs are not recommended to our Clients as they expose the partners to personal liability for all damages and losses. Instead, our Clients should either choose an LLC or an LLP.

Investment company

An investment company will allow our Clients to pool their investors’ capital and invest this money on their behalf. However, this business activity will require the owners of the company to file an application with the Monetary Authority of Singapore (MAS). For fund management, the application will take one of the two forms: either as i) an application for a registered fund management company or ii) an application for a Capital Markets Services license.

Registered fund management companies are limited to 30 accredited or institutional investors, up to 15 of whom may be other funds invested in by accredited individuals. Investors qualify as “accredited” under Singapore’s Securities and Futures Act if they have either i) net assets of more than S$2,000,000 or ii) annual income greater than S$300,000. There is a cap of S$250,000,000 on assets under management for this kind of fund manager.

Capital markets services (CMS) licences, on the other hand, are much more flexible. Although further accreditation is required from the MAS to offer services to retail investors, CMS-licensed fund managers have no limits on the assets under management or number of investors;

CMS-licensed fund managers must maintain core capital levels of at least S$250,000, of which at least S$100,000 must be deposited with the MAS. Annual audits are required to ensure that this and other compliance requirements are met.

All registered and licensed fund management companies must have two directors resident in Singapore with at least 5 years’ experience in financial services to establish a track record. They also require two local employees, one of whom must be the CEO and the other an Executive Director, with each of these staff having at least 5 years’ experience. If the CMS-licensed manager has authorization to work with retail investors, a third staff member is needed and the CEO requires 10 years of experience.

Summary	Subsidiary	Autonomous Branch Office	Dependent Branch Office
Establishment of a new legal entity?	Yes	No	No
Legal presence	GmbH, AG etc	Registration of a German physical presence	Registration of a German physical presence
Founding and organisational formalities	GmbH - moderate; AG - low	Moderate	Low
Registration authority	Commercial register of Germany	Trade Register of Germany	Trade Register of Germany

Independent Commercial Agent

Representative offices are not recognized under German law; instead, foreign firms hire an agent who will work independently. The actions of agent are not the actions of the parent firm, so our Client does not need to register with the German Commercial Register.

General Partnership (OHG)

This is an association between two or more people wherein all partners carry unlimited personal liability for the debts of the business. Business entities can enter into a general partnership; the formed entity will be GmbH & Co. OHG.

Limited Partnership (KG)

This differs from OHG with respect to the partner’s liability. One or more partners enjoy limited liability, while there must be at least one general partner with unlimited liability. The names of the limited liability partners must be registered in the Commercial Register for legal purposes.

European Stock Corporation (SE)

Two or more existing companies in different EU states may merge to create a European Stock Corporation. This allows them to do business across Europe with just one vehicle, rather than setting up a network of subsidiaries. The combined entity requires share capital of at least €125,000.

Comparison of German company types

Summary	Germany LLC	German AG	Autonomous Branch
How long to set the company up?	5 weeks	4 weeks	3 weeks
How long to open company bank account?	4 weeks	2 weeks	2 weeks
Legal Liability	Limited	Limited	Unlimited
Wholly Foreign owned	Yes	Yes	Yes
Minimum Initial capital	25,000	50,000	0
Corporate Bank Account	Commerzbank	Commerzbank	Deutsche bank
Tenancy agreement required before incorporation	Yes	Yes	Yes
File annual tax return	Yes	Yes	Yes
Managing Director need to travel?	Yes	Yes	Yes
Resident director required	No	No	No
Resident shareholder required	No	No	No
Minimum directors allowed	1	1	1
Minimum shareholders	1	1	0
Germany company secretary required	No	No	No
Corporate shareholders allowed	Yes	Yes	Yes
Corporate director(s) allowed	No	No	No
Public register of shareholders and directors	Yes	Yes	Yes
Allowed to trade on Stock Exchange	No	Yes	No
Bearer Shares allowed	No	Yes	No
Germany Corporate Tax Rate	15.825%	15.825%	15.825%
Company tax payable on?	Worldwide Income	Worldwide Income	Germany based Income
Annual financial statements required	Yes	Yes	Yes
Statutory audit required	Yes	Yes	Yes
Tax exempt free zones available	4	4	4
Withholding Tax on Dividends without DTA	0.26	0.26	0
Withholding Tax on Dividends with DTA	5% - 15%	5% - 15%	0
Allowed to issue sales invoices	Yes	Yes	Yes
Allowed to sign contracts	Yes	Yes	Yes
Allowed to import and export goods	Yes	Yes	Yes
Must appoint a Supervisory Board	No	Yes	No
Must rent an office in Germany	Yes	Yes	Yes
Can buy German property?	Yes	Yes	Yes
Can own equity in other German companies?	Yes	Yes	Yes
Estimate of engagement costs	€	€	€
Germany company incorporation fee	4,950	5,830	6,340
Average total Germany business setup costs	14,090	11,320	12,680
Average annual costs including accounting and tax fee	13,050	7,055	7,567

Investment company

Contact us

For more info on company registration, please contact our expert directly:

Mr. Petar Chakarov
Senior Manager, Sales & Business Development
Get in touch