Singapore Company Formation: The 3 Types Of Business Setup
Singapore has always been considered as one of the best business centers in the Asia
Pacific region due to its proximity with major markets, pragmatic government, tax benefits for foreign companies, and viable corporate laws.
There are three business arrangements available for foreign entrepreneurs who already have an existing business abroad and want to setup a Singapore company in order to expand their operation. These are the three business entities a foreign company can adopt to legally operate in Sinagapore:
Singapore Subsidiary Company
A subsidiary company is treated as a separate legal entity which means it is directly responsible for its own losses, debts, and activities rather than its parent company from abroad.
Since the nature of the business is locally incorporated private limited company despite being owned by foreigners, a subsidiary company is enjoying the same benefits as the local residents are enjoying such as tax exemptions.
A foreign company should hire at least one director as a legal requirement, according to the Accounting and Corporate Regulatory Authority (ACRA). In order for the director to be qualified, he must be a local resident or someone holding an Employment Pass, EntrePass, or Permanent Residence Status.
Maintaining a registered office is also a legal requirement since it is where a subsidiary company holds and store Singapore mandated documents.
Singapore Branch Office
Although a branch office is similar to a subsidiary company in so many ways as it is allowed to do business activities by its main office, there are some salient differences between them which are as follows;
Foremost, unlike a subsidiary company, the parent company is directly accountable for financial losses, liabilities and other unfavorable business circumstances of the branch because the branch office is considered a legal extension of the parent company.
The second difference is that a branch office, being an extension of its foreign company, is treated as a non-resident business which means that it will not enjoy the same tax benefits provided to subsidiary companies and local businesses.
Singapore Representative Office
The major disadvantage of a representative office is that it cannot engage in a profit-generating and other activities deemed "commercial" because it is not treated as a legal business entity.
According to the Singapore Companies Act, a representative office is only permitted to conduct activities such as doing market research on the feasibility of the business in the country, directing local agents and distributors of its parent company and engaging in customer service provided that it will not engage in any technical or repairing inquiries and negotiations.
A foreign company is required to renew the permit for its representative office annually at a maximum of three years, and after this period, it must shift to a branch office or subsidiary company if it wants to maintain its business presence in Singapore.
Any of the aforementioned business structure can be used in getting your business started in Singapore depending your needs. However, it is highly recommended that one must approach a reputable company registration firm for consultation and assistance.
by: Diane Enriquez
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