LLC Registration in Singapore: Is it a beneficial business structure?

Varun Hariharan

10 Sep, 2022

Singapore is one of the countries which come under the category for ease of doing business. Hence, it is simple to set up a business in Singapore. There are different forms of business structures in Singapore. It is crucial to understand the advantages and disadvantages of a business before setting up a business structure. LLCs are one of the business structures which are used by entrepreneurs. This article is going to analyse if setting up an LLC in Singapore is beneficial.

LLC Registration in Singapore: What is it?

LLC is an abbreviation for Limited Liability Corporation or Limited Liability Company. Depending on the jurisdiction, the term LLC is depicted differently. LLC registration in Singapore is required for every business.

Depending on the needs of the business, an individual would consider the above business structure. Under LLC registration in Singapore, there are different forms of entities that can be established. Hence, the entrepreneur needs to consider the best type of structure based on the needs of the business.

Types of Business Structures in Singapore

• Sole Proprietor
• Partnerships
• Limited Liability Partnerships
• Limited Liability Corporation

Sole Proprietor- The essence of a sole proprietor business means a single individual handling the affairs of the business. Sole means single, hence the business is managed solely. The liabilities of the sole proprietor business would become the liabilities of the owner or individual. There is no concept of limited liability under the sole proprietorship business. Hence in a traditional sole proprietor business, there is no separate legal entity status enjoyed by the owners of the business.

Partnerships– A partnership business can be understood as any form of entity that has two or more individuals running the business with the common intention of sharing profits and losses of a business. Partnership business has to be distinguished from a sole trader or sole proprietor business. However, the concept of limited liability cannot be enjoyed by a partnership business. Hence, partners under the traditional partnership business do not enjoy the status of a separate legal entity.

Limited Liability Partnerships (LLP) – LLP or Limited Liability partnerships is a distinct legal entity. This business enjoys the benefits of limited liability plus has additional perks of a traditional partnership business. The liability of a limited liability partnership is separate from the partners of the business. Hence, creditors cannot go to the partners for any debts payable by the partnership business. Separate directors and partners manage the business of a limited liability partnership business.

Limited Liability Corporation (LLC) – An individual can start a company in Singapore. The individual or entrepreneur has to go for LLC registration in Singapore. LLC registration in Singapore is quite straightforward when compared to other forms of business entities in Singapore. There are lots of benefits enjoyed by a Limited Liability Corporation when compared to other business structures in Singapore. The benefits of limited liability or separate legal entity are enjoyed by the shareholders and directors of the LLC. Therefore company creditors cannot go for the personal assets of the shareholders and directors for a debt owed by the company. Entrepreneurs and foreign investors should consider going in for LLC registration in Singapore, as it provides the benefits of a separate legal entity.

What are the forms of LLC registration in Singapore?

On comparing all the business structures in Singapore, it is crystal clear that the benefits offered by the Limited Liability Partnerships and Limited Liability Corporations outweigh the benefits of a traditional partnership or a sole proprietorship concern. However, there are different forms of LLCs in Singapore which an individual can utilise.

Hence, it is important to understand the differences in the types of businesses:

Types of LLC registration in Singapore

• Private Company (Private Limited Entity)
• Public Company (Public Limited Company)
• Company Limited by Guarantee (Non-Profit Organisation)

Private Company (Private Limited Entity) – Any business that cannot have its shares registered in a public stock exchange is known as a private limited entity. The liability of shareholders and directors is limited to the shares owned by them. However, a private limited company is a form of an LLC in Singapore.  When an individual goes for LLC registration in Singapore, then this form of LLC can be chosen.

There are different benefits to choosing this form of LLC:

• Limited Liability Status.
• Fewer Registrations with the Registrar of Companies.
• Not much compliance is required as per the Companies Act of Singapore (Chapter 50).
• When a private company is formed, then the company has to have Privately Limited at the end of the company name.
• No Compliances related to any form of stock exchange.
• There is no minimum amount of share capital required for a private limited company.

There are specific disadvantages also for choosing this form of LLC:

• Any individual who wants reputation and recognition would not be able to achieve the same through forming a private limited company.
• When choosing LLC registration in Singapore for a private limited company, then regular compliances do not need to be followed.
• However, if the individual or entrepreneur wants to gain recognition of the business, then going in for the public limited company would be suitable.

Public Company (Public Limited Company) – Any form of entity which is categorised by listing its shares in a public stock exchange is understood as a limited public entity or a public limited company. A public company or public limited company has to be differentiated from a private limited company. Suppose an individual wants to consider LLC registration in Singapore for starting a public limited company then the minimum amount of share capital is required for forming a public limited company.

Forming this form of LLC in Singapore has the following benefits:

• If any individual wants recognition of the company, then forming this type of entity would be suitable.
• Listing shares in a stock exchange not only increases the reputation of the company, but it also improves the credit rating of the company. Apart from this, a company can raise additional funds by issuing shares to the public.
• Raising of funds is not only through the primary issue, but funds can also be raised through the second issue of securities. Such issue of securities will be for preference shareholders. Preference shareholders have specific preferences when it comes to the payment of dividend and capital during winding up of the company.

There are specific disadvantages also for choosing this form of LLC:

• Minimum capitalisation is required for a public limited company.
• For forming a public limited company, a specific number of directors and shareholders are required.
• More amount of compliances are required for a public limited company when compared to that of a private limited company.
• Apart from regular registrar compliances, there would also be additional stock exchange compliances which may be an additional burden for different forms of individuals.
• By choosing this form of LLC registration in Singapore, regular compliances would be required.
• It is expensive when compared to establishing a private limited company in Singapore.

Company Limited by Guarantee (Non-Profit Organisation) – A Company limited by guarantee is traditionally called a Non-Profit Organisation. Here the liability of the shareholders and directors is limited to the guarantee. A typical non-profit organisation is set up for carrying out activities related to philanthropy. Such organisations are formed for the greater good of the society and community.

The following are the benefits of forming this form of organisation:

• Any individual considering LLC registration in Singapore can go for this form of an entity if the main purpose or principal purpose of the organisation is to carry out not for profit activities or non-profit activities.
• It is simple to secure funding for these forms of organisation, as there a lot of government benefits and support incentives for these entities.
• Setting up a non-profit organization is relatively simple.

There are specific disadvantages also for choosing this form of LLC:

• This form of organisation cannot issue shares.
• The main objects in the Memorandum of Association of this organisation are for non-profit activities. Hence any form of deviation from the objects of the business would give rise to a different form of penalties.

Hence the above are three types of LLC in Singapore. Any individual looking for LLC registration in Singapore has to carefully consider different options. The advantages and disadvantages have to be weighed before considering which LLC to go for.

From the above comparisons, it can be understood that choosing a private limited company is the most beneficial option when it comes to LLC registration in Singapore.

What is the main regulatory authority for LLC registration in Singapore?

The primary regulatory authority for LLC registration in Singapore is the Accounting and Corporate Regulatory Authority^[1] (ACRA). This institution is the main authority for LLC registration in Singapore. An individual or entrepreneur wanting to establish an LLC in Singapore must register with the above authority.

How can I register my LLC with the ACRA? (LLC Registration in Singapore)

The process of registering LLC with the ACRA is quite straightforward. As long as the procedure is followed, the process of LLC registration is seamless.

The following steps are required for LLC registration in Singapore:

1. Secure Consent from the ACRA
2. Submit Respective Documents
3. Application to ACRA

• Secure Consent from ACRA- If the applicant satisfies the eligibility criteria for LLC registration in Singapore, then an application can be made to the ACRA. However, the applicant needs to secure prior consent from the ACRA before commencing the business.

When seeking approval from the ACRA, the following guidelines have to be adhered by the applicant:

1. The name of the company has to be under the guidelines for naming a business entity.
2. The name of the company must not go against any provisions related to copyrights act, trademarks act or any other form of intellectual property law in force.
3. The name of the company must not be offensive or go against the national interests of the country.
4. If the company has certain phrases, then approval from the respective regulatory authority is required. For example, if a company is associated with producing media or entertainment, then approval from the respective authority would be required. Similarly, if the company is engaged in providing some form of banking and finance services, then consent from the respective authority would be required.
5. The online portal known as BizFile must be adhered to. The application for the LLC has to be in accordance with the requirements of the portal.
6. When an application for the name is made to the ACRA, then such name will be reserved for a period of 60 days. If the application gets delayed then, a fresh application has to be made for the change of name. This would be extended for a further period of 60 days.

• Submit Respective Documents- Once approval is got from the ACRA, then the applicant must proceed with the next steps to submit respective documentation. The documents would provide legal proof that the applicant wants to apply for LLC registration in Singapore.

The below documents have to be submitted to the ACRA:

1. Certificate of Incorporation.
2. Document or letter indicating that the company is approved by the ACRA.
3. Activities which are carried out by the applicant.
4. Registered Office Address of the applicant for carrying out the business.
5. Documentation relating to shareholders and directors of the business entity.
6. Proof on the appointment of Company Secretary for the Company.
7. If the applicant is a foreign organisation or a foreign individual, then documentation such as the visa, passport, and other respective documents have to be submitted to the ACRA.
8. Residential Status of the applicant (Through the Passport)

• Application to ACRA- In the final step, the applicant has to submit all documents along with the completed application form to the ACRA. Once this is carried out, the ACRA will make an online intimation to the applicant regarding the outcome of the application.

Conclusion

Read our article:Company registration in Singapore: Requirements and Procedure