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Epica Learn Series

Business Entity Options for Registration for Foreign Corporates Intending to Register in Singapore

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Business Entity Options for Registration for Foreign Corporates intending to Register in Singapore

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.

What Is a Private Limited Company?

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.

What Is a Branch Office?

Business Entity Option - Branch office

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.

What Is a Representative Office?

Business Entity Option - Representative office

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.

How do Private Limited Company/Subsidiary, Branch, and Representative Office Differ in Certain Factors?

Business Entity Option - Certain factors

Legal Form

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.


Business Entity Option - Liablities

Liabilities

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.


Business Entity Option - Scope

Business Scope

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.

  • Research on markets, service/product information, and target clients
  • Generate trade contacts and handle service/product inquiries
  • Engage in trade events and exhibitions
  • Determine regulatory requirements to run a long-term entity
  • Conduct feasibility studies and liaising activities

Business Entity Option - Company name

Company Name

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.


Business Entity Option - Tax

Corporate Tax

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.


Business Entity Option - Audit

Audit

In terms of audit:

  • A private limited company and subsidiary are exempted from audit provided that they will conform to audit exemption criteria.
  • Audit is compulsory for a branch office.
  • Audit is not applicable to a representative office.

Business Entity Option - Filling account

Filing of Accounts

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.

What’s the Conclusion

We must say that a private limited company manifests a reputable image, promises attainable growth and success, and increases your chances of acquiring commercial loans from banks or financial firms. It is also being taken more seriously by potential investors, suppliers, bankers, and other professionals. Hence, foreign investors are more willing to choose this business structure than a branch and representative office.

Foreigner Package

New Company Setup

S$2,600
S$4,000

Local Package

New Company Setup

S$1,100
S$1,700

Transfer Package

Existing Company

S$1,000
S$1,500

Singapore Branch

New Branch Setup

S$4,000
S$5,000

Representative Office

New Setup

S$2,500
S$3,000

BVI Company

Singapore Bank Account

US$2,200
US$3,000

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