Singapore is globally recognised as one of the most business-friendly jurisdictions in the world, consistently attracting entrepreneurs, investors, and multinational companies seeking to establish a regional or global presence. One of the most important decisions when starting a business in Singapore is choosing the appropriate legal structure, as it affects your liability, tax obligations, compliance requirements, and growth potential.
In this article, we provide an overview of the main types of business legal forms available in Singapore, and offer insights on which structure may best suit your need, especially for a trading business.
1. Sole Proprietorship
A sole proprietorship is the simplest and most cost-effective business structure. It is owned and managed by one individual or a company, with no distinction between the business entity and the owner.
Advantages:
- Easy and inexpensive to register
- Minimal compliance and reporting obligations
- Full control over decision-making
Disadvantages:
- The owner bears unlimited personal liability for business debts and obligations
- Not a separate legal entity from owner
- Tend to have limited access to capital and scaling opportunities
- Less credibility in dealing with banks, suppliers, and potential partners
Best suited for: Freelancers or low-risk, small-scale businesses.
Not recommended for trading businesses due to the high exposure to liabilities.
2. Partnership, Limited Partnership (LP), and Limited Liability Partnership (LLP)
These structures involve two or more partners coming together to operate a business. Among these, the Limited Liability Partnership (LLP) is the most common for professional services firms.
Advantages (LLP in particular):
- LLPs are separate legal entities
- Partners enjoy limited liability
- Flexible internal structure for profit-sharing and management
Disadvantages:
- General Partnerships and LPs do not provide full liability protection for its partners
- Potential internal conflicts among Partners, if not properly structured
- LLPs may lack the business image and scalability of a private limited company
Best suited for: Professional practices such as law or accounting firms.
Less ideal for trading or operationally intensive businesses due to scalability and liability consideration.
3. Company
The Private Limited Company (Pte Ltd) is the most preferred structure for businesses in Singapore, especially those involved in trading, investment, or cross-border operations.
Advantages:
- Separate legal entity from its owners
- Shareholders’ liability is limited to their capital contribution
- Perpetual succession—business continues even if shareholders change
- Attractive tax incentives for new start-ups
- Greater credibility and access to capital
- Suitable for international trade and long-term expansion
- Can be fully foreign-owned
Disadvantages:
- Higher initial setup and ongoing compliance costs
- Mandatory annual filings with regulatory board (ACRA) and IRAS
- Requirement to appoint at least one local resident director
Best suited for: Trading businesses, foreign-owned subsidiaries, SMEs, and startups aiming for growth and investment
Choosing the Right Structure: A Strategic Consideration
For most entrepreneurs—particularly foreign investors entering Singapore’s market or local SMEs planning to scale—incorporating a Private Limited Company is the most strategic and future-proof choice. It offers robust legal protection, tax efficiency, and business credibility necessary to succeed in a competitive environment.
However, the optimal structure ultimately depends on your business objectives, risk profile, and operational scale. Working with experienced legal and corporate advisors can help ensure that your structure is compliant, scalable, and aligned with both current and future business needs.
Need Further Guidance?
If you’re still considering which structure best fits your trading or investment plans, our team at JUNIPERS is happy to assist you with legal entity selection, incorporation, regulatory compliance, and ongoing tax and business advisory support. Reach out to us for a free no-obligation discussion today for tailored advice and end-to-end service.