Types of Business Entities - Which is the suitable one for you?
Have you always been wondering which business structure you should choose before starting your own business?
It is important to know the differences of these 4 types of business entities before you decide:
- Limited Liability Partnership
- Limited Partnership
We will start with the simplest form – Business
A business can be a sole-proprietorship with one owner or a partnership consisting of 2 to 20 owners. Business owners are personally liable for the debts and losses of the business, which is also known as unlimited liability.
The next business entity, Company, usually has the words Pte Ltd or Ltd as part of its name. One of the advantages of owning a company is that the shareholders have limited liability, so they are not personally liable for the debts and losses of the Company.
Limited Liability Partnership (LLP) is a partnership with a minimum of two partners and they have limited liability, however, for Limited Partnership (LP), there needs to be a general partner and a limited partner. Whilst the general partner is personally liable for debts and losses of the LP, the limited partner enjoys limited liability.
Here’s a few questions to ask yourself while choosing an entity:
- Do you plan to own the business by yourself or together with other people?
- How much capital are you prepared/willing to invest?
- Are you able to finance your business solely or would you need finance from other persons as well?
- Do you prefer Limited or Unlimited liability?
If you have your answers for the above questions and have decided on an entity, make sure to adhere to the following rules for opening your business:
- At least 18 years old
- All entities must have at least one person who is residing in Singapore
- For Business, LLP and LP, there is a requirement that the owner or partner’s Medisave must be paid up with a CPF board at all times
- Comply with all requirements for registration and post-registration
Ready to register your own business? Do also find out if you are required to register your business with ACRA as well as the advantages of registering with ACRA.
If you still want to learn more about starting a business, fret not, there is a free online course to clear all your doubts!