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Starting a new company in Singapore can pave the way for many opportunities in the business world, and this is what every foreign business owner looks forward to when they plan to represent their companies in the country.
The top three entity types for foreign company registration in Singapore are a private limited company or subsidiary, branch, and representative office. To get a better understanding of which business structure your foreign company should register with, read this thorough comparison among these entities.
A private limited company is the most common form of a limited liability corporation (LLC). In Singapore, a limited company is a company that is limited by shares. A private limited company has its own legal existence, independent from its parent company. Its shares can be owned by a maximum of 50 persons and cannot be owned by the general public. Its shareholders can be individuals, corporate bodies, or both. It can also be 100% foreign owned. When foreign companies use this option to register their business in Singapore they will typically hold 100% shares in the subsidiary entity.
Many privately owned companies in Singapore are registered as private limited companies. A private limited company is the most innovative, versatile, and upgradeable business structure in Singapore.
A branch office is an extension of its parent company, which may be located in another country. It does not have a separate legal existence from its parent company. Its shareholders will be mandated by its parent company.
Medium- to large-sized foreign companies with specialized services worldwide can choose this entity type to reach a much broader business scope.
A representative office is not permitted to perform sales or any income-generating activities. It must only perform market research and study.
Foreign business owners who are still familiarizing themselves with Singapore’s overall business climate choose a representative office first before registering a full-scale company in the country.
A private limited company is unassociated from its owners and shareholders. It is granted with rights and obligations that it must adhere to. A subsidiary has the same legal structure as a private limited company. An alternative to a private limited company or subsidiary is a branch or representative office.
As an extension of its parent company, a branch office is not deemed as a separate legal entity. It is 100% owned by its parent company.
A representative office is not a legal entity. As an extension of its parent company, it is only set up for temporary administrative tasks. It must be renewed every year and last up to three years only. Afterward, it must convert to a subsidiary or branch.
A private limited company and subsidiary can obtain assets, incur debts, engage in contracts, own a property, and summon or be summoned in their own name. The liabilities of their shareholders are only limited to the range of their contribution in the company.
In the case of a branch office, its liabilities extend to its parent company. Its liabilities or debts must be paid by its parent company. It can also be sued in Singapore, which will put its parent company’s assets at risk.
The liabilities and debts of a representative office reach its parent company.
A private limited company must refer to the Singapore Standard Industrial Classification Code 2010 to discuss its business activities during the company registration process. Meanwhile, a subsidiary company can set its own business activities separate from its parent company.
A branch office must have the same business activities as its parent company.
A private limited company name must be unique and easy to read. It must not be similar to any existing Singapore company nor display vulgarity or obscenity. Words, such as media, finance, bank, and the like require specific approval from a third-party authority. It must be also striking and carry the brand image well. It typically ends with the words “Private Limited,” “Pte Ltd,” or “Ltd.” A subsidiary must observe these guidelines if it intends to construct its own name; otherwise, it can follow the name of its parent company.
A branch office must follow the company name of its parent company, and the words “Singapore Branch” will be added at the end of it.
A representative office must follow the company name of its parent company, and the words “Representative Office” will be added at the end of it.
A private limited company and subsidiary are tax-efficient business structures as they are both deemed as resident entities and entitled to local tax benefits.
A branch office is taxed as a nonresident entity. Nonresident entities in Singapore were not eligible for tax exemptions, incentives, treaties, and grants up to 2018. At present, some tax benefits have been granted to nonresident entities. If it can also show compliance proofs to IRAS, then it can become a resident entity.
Corporate tax does not apply to a representative office as it is not an income-generating entity.
In terms of audit:
A private limited company must conduct its annual general meeting (AGM) annually, file its annual returns a month after its AGM, and submit audited/unaudited report and tax computation. Meanwhile, a subsidiary must also conduct its annual AGM, file its own annual return, provide financial statements, and submit annual tax.
A branch office must file its own audited accounts alongside the accounts of its parent company. It must also file annual return and submit annual tax.
A representative office does not have to file its accounts.
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