Singapore offers several business structures, each with its own advantages and trade-offs. Choosing the right one depends on your business needs, ownership arrangement, and future plans. Below is an overview of the main options:
1. Sole Proprietorship
This is the simplest form of business, owned and controlled by a single individual. It is quick and low-cost to set up, with minimal compliance obligations. However, a sole proprietorship is not a separate legal entity—the owner and business are legally the same. This means the owner bears unlimited personal liability for any debts and liabilities incurred by the business.
For instance, if the business cannot pay its debts, creditors may pursue the owner’s personal assets. Sole proprietorships are best suited for freelancers, self-employed individuals, or small ventures engaged in low-risk activities. If there are two or more owners, the business must be structured as a partnership instead.
2. Partnership
A partnership is similar to a sole proprietorship but involves two or more individuals or entities jointly operating a business. It is relatively easy to register through ACRA.
There are two main types:
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General Partnership (GP): All partners share unlimited liability, and each partner is jointly and severally liable for the business’s debts. That means any partner can be held responsible for the full amount if others cannot pay.
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Limited Partnership (LP): This allows for limited partners (with liability capped at their investment and no management powers) and at least one general partner who has unlimited liability.
It is strongly advised to have a partnership agreement outlining roles, responsibilities, and profit-sharing arrangements. Partnerships are often used by family businesses or professionals, though unlimited liability makes them less popular for modern commercial enterprises.
3. Limited Liability Partnership (LLP)
An LLP blends elements of a partnership and a company. It is a separate legal entity, meaning it can own assets and enter contracts in its own name. Partners in an LLP enjoy limited liability and are not personally liable for the actions of other partners.
However, each partner remains liable for their own misconduct or negligence. For example, if one partner is sued for professional negligence, only that partner is liable—not the rest.
An LLP must have at least two partners, but there is no cap on the number, and partners may be individuals or corporations. LLPs are popular with professional services firms (e.g. consultancies, law practices, accountancies) as they combine operational flexibility with liability protection.
4. Private Limited Company (Pte Ltd)
This is the most common and preferred structure for businesses aiming to scale. A Pte Ltd is a separate legal entity from its shareholders, which means it can own property, sue or be sued, and enter contracts in its own name.
Key benefits include:
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Limited liability for shareholders (up to their share capital)
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Ease of raising capital (through share issuance)
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Tax incentives and exemptions for new companies
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Perpetual succession (ownership continues even if shareholders change)
A private limited company can have up to 50 shareholders and must adhere to statutory requirements such as maintaining proper accounts and filing annual returns. While it has a higher compliance burden, it also offers professional credibility and is more attractive to investors. Most SMEs and startups in Singapore register as Pte Ltd companies.
5. Others (Public Companies, VCCs)
Other structures include:
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Public Companies: Can have more than 50 shareholders and may be listed on the Singapore Exchange (SGX). These are highly regulated and used by large businesses raising capital from the public.
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Variable Capital Companies (VCCs): Designed for investment funds, VCCs allow flexibility in capital structure and sub-fund segregation. They are generally used in fund management, not typical commercial businesses.
These options are not commonly used by new or small business owners.
Which Structure Should You Choose?
If you’re a solo entrepreneur looking for ease and minimal compliance, a sole proprietorship may suffice—but do consider the personal liability risk.
If you’re starting with partners in a professional field, an LLP may suit you.
If you plan to scale the business, attract investors, or protect your personal assets, a Private Limited Company is usually the most suitable choice.
Many business owners begin as a sole proprietor and convert to a Pte Ltd as the business grows (see Article 28 for when and how to convert). This transition is common in Singapore’s startup ecosystem.
Still unsure which structure best fits your business? Get in touch with us for a consultation. We’ll help you evaluate your options and guide you through the setup process with confidence.