subject: Foreign Business Organizations Guide to Forming a Company in Singapore [print this page] Foreign Business Organizations Guide to Forming a Company in Singapore
In Singapore, there are three business structures a foreign business organization can adopt: a representative office, branch office, and subsidiary company, with each of these having its specific purpose, advantages, and disadvantages which must be taken in to consideration.
Meanwhile, this is a guide to foreign business organizations interested to form a Singapore company:
Representative office
This setup is designed for conducting market research and feasible studies that will determine the business potential in Singapore. However, this is also allowed to perform other non-commercial activities like overseeing the activities of its parent company's local distributors and agents; acting as a liaison office of its parent company during a negotiation deal; and providing costumer assistance not related to repair and technical inquiries.
It is important to remember that a representative office is not allowed to perform any commercial activities such as services for fee, lease warehouse facilities, store and ship products in Singapore, and enter in a business contract.
Because of these limitations, foreign companies are advised to treat their representative office as a temporary setup.
Branch office
A Singapore branch office is allowed to conduct commercial activities as long as these are also performed by its parent foreign company.
In legal perspective, a branch office is an extension of its parent company which means that the latter does not enjoy limited liability from the financial losses, debts, and legal claims of its Singapore-based office.
And being an extension of its parent company from abroad, a branch office is still considered a foreign entity which means that it is not eligible for the local tax benefits and exemptions.
Subsidiary company
Even if its owned 100% by a parent company abroad, a subsidiary company is intrinsically a regional incorporated private limited company that makes it suitable for local tax exemptions and other benefits.
Under the Singapore Companies Act, a subsidiary company may have one to 50 shareholders who may be a foreign individual or Singapore resident.
A subsidiary stands on its own as a legal business entity from its parent company, as a result, the latter enjoys limited liability in which it is protected from the financial losses and debts of its Singapore-based company.
Because of the notable advantages of a Singapore subsidiary company, most business professionals believe that this structure is the most ideal to foreign companies that are planning to stay longer in the country.
