Should I register a LLP or a PTE LTD?

Should I register a LLP or a PTE LTD? This is possibly one of the most common topics that comes up when applicants wishes to register a company in Singapore. The first thing you have to do is to understand the difference between these two business entities. Limited Liability Partnership or LLP for short, allows business owners to have the adaptability of conducting as a partnership while having a separated legal identity like PTE LTD. Speaking of Private Limited, it is a company limited by shares. Without further ado, let us now take a closer look at these two business entities shall we?

The two main differences between these two business vehicles are:  taxation and legal liability.

In the case of PTE LTD, the business owner gets taxed when they receive dividends or sell their shares at a profit. In a way, this means that the minute the income has been taxed at the allied level; dividends can be allocated to shareholders tax free. On the other hand, LLP is not a legal tax entity. This implies that each partner should pay for his or her specific amount of money that they had made through the partnership. Hence, there are no corporate tax benefits. If you’re planning to register a company in Singapore, this is one of the many points to take note of.

When it comes to legal liability, there is a something common between these two business vehicles. For one thing, both PTE LTD and LLP are limited. PTE LTD carries liability. When a Pte Ltd gets sued, it’s the company that’s getting charged – not the owners. In such a way, the owners are liable as the business belongs to them. Therefore, the owners can lose just as much. In a nut shell: sue or be sued in its own name. Similarly, LLP has a separate legal identity. Likewise, it can sue or be sued in its own name.

So here’s the tough question again: if I were to register a company in Singapore, should I choose PTE LTD or LLP? To put it simply, it heavily depends on your business structure. For instance, if you’re a lawyer and you’re planning to set up your own firm, it would highly recommend for you to pick LLP. This would even work if you’re intending to have one or more additional partners. In addition, if your partner decides to resign any changes in the LLP does not affect its liabilities. One of the several positive aspects of LLP is the ease of acquiescence.  It is much simpler than PTE LTD. But that’s not to say that PTE LTD is generally a rough choice. For one thing, PTE LTD holds a much more reliable visual appeal.

Most importantly, think carefully. Be sure of your goals: what you want to achieve, are you the only boss who’s operating this business etc…  There are many elements involved for a successful business. In conclusion, depending on the type of your business structure, you have to keep in mind these necessary factors to focus on your company. After all, all these points are the key factors for a profitable career. We all know that starting a business in Singapore is no easy task. It somehow feels that you have another mouth to feed at home. It is very time-consuming and takes a lot of effort. Just like what Walt Disney mentioned, “All our dreams can come true, if we have the courage to pursue them.” Everyone has to start from scratch. Once you’re ready, you will be prepared for a new adventure.

What are the different business entities?

Just like choosing an ideal name for your company, finding the type of business entity for your new business is equally daunting. Which brings us to the next point; it is extremely vital for entrepreneurs to take note of their decision. When starting a business in Singapore, you might want to note the different business entities available in this country. The activity of a business is detached from the personal activities of the owner and of course the employees. This concept applies to all businesses regardless of their legal statuses. To put it simply, any transaction that connects to the business is recorded accordingly.

There are mainly seven business entities in Singapore: Public Limited Company, Public Company Limited by Guarantee, Limited Partnership, General Partnership, and the three most common, Limited Liability Partnership (LLP), Private Limited Company and Sole Proprietorship.

Sole Proprietorship is generally for entrepreneurs with small scale businesses. This type of business entity is considered to be the simplest arrangement as it is the most basic form of the business structure. Since it is formed with only one individual, the owner of the business is entirely accountable for his/her business activities.

Possibly the most popular business entity, Private Limited Company is applicable for almost all professions and trades. Unlike Sole Proprietorship, entrepreneurs who choose Private Limited Company get to have certain perks like tax benefits though this only applies to corporate entities. One of the many reasons why entrepreneurs pick Private Limited Company is because it’s more secure. This business entity supports reliability, which is a key factor if you were to start a business in Singapore.

Are you an architect like the fictional character Ted Mosby? Planning to start your own firm? In that case, Limited Liability Partnership is probably for you. While the compliance requirements are more perplexing than Sole Proprietorship, it is easier than Private Limited Company. One of the pros in choosing this business entity is that it has a separate legal identity. However, it is a requirement to have a minimum of two partners for this business vehicle.

Other less common business entities like General Partnership is formed by two to twenty partners. This is an alliance where both business partners share equally in terms of responsibility and liability.

Next up, Limited Partnership is formed with a minimum of two partners, with at least one general partner and at least one limited partner.  A general partner holds account for the actions and is responsible for all debts of the Limited Partnership. If the limited partner does not participate in the Limited Partnership, he/she is not liable for the obligations of the Limited Partnership.

Public Limited Company is exactly what its name suggests. It is suitable for listed companies with fifty or more shareholders. It is a requirement for the company to register a prospectus with the Monetary Authority of Singapore before making any public offers of shares and debentures.

Last but not the least, Public Company Limited by Guarantee is a business structure which have some basis of national or public interest. This business entity is basically used for charities as it fulfils non-profit activities.

So if you were to start a business in Singapore, be sure to familiarise yourself with the various types of business entities available in our sunny island. Entrepreneurs who have strong ideas about their businesses and with willingness to understand the business world would have a lot of potential for a successful career. After you’ve pooled your expertise, it is time making difference and meeting expectations. Just remember: anything is possible if you reach for the stars.