The legal entity you choose at the start shapes your liability, tax, ability to raise money, and credibility. Founders sometimes pick the cheapest option to save a few hundred dollars, only to restructure expensively once they hire, raise, or sign serious contracts. Here's how the options actually compare in Singapore.
Sole Proprietorship
The simplest and cheapest to register. But it is not a separate legal entity — the owner is personally liable for all business debts and obligations, putting personal assets at risk. Profits are taxed as the owner's personal income (up to 24%), and you cannot bring in equity investors. Suitable only for very low-risk, one-person operations with no plans to scale.
Partnership
Two or more owners sharing profits and losses, with each partner personally and jointly liable for the partnership's debts — including those incurred by other partners. Like a sole proprietorship, it can't raise equity and offers no liability protection. Rarely suitable for a growth startup.
Limited Liability Partnership (LLP)
An LLP gives partners limited liability (their personal assets are generally protected) while being taxed like a partnership — profits flow through and are taxed at each partner's personal rate. LLPs suit professional practices (law, accounting, consulting) but are a poor fit for product startups that need to issue shares and options.
Private Limited Company (Pte. Ltd.)
A separate legal entity with limited liability — shareholders risk only their invested capital. It can issue shares to investors and options to employees, access the Start-Up Tax Exemption and government grants, and is taxed at the corporate rate (17%, with generous exemptions bringing the effective rate far lower on early profits). It carries more compliance (corporate secretary, annual returns, accounts) but is the only structure built for growth.
Decision Snapshot
| Factor | Sole Prop | Partnership | LLP | Pte. Ltd. |
|---|---|---|---|---|
| Separate legal entity | No | No | Yes | Yes |
| Limited liability | No | No | Yes | Yes |
| Can raise equity | No | No | Limited | Yes |
| Tax basis | Personal | Personal | Personal | Corporate + exemptions |
| Best for | Solo, low-risk | Rare | Professional firms | Startups & SMEs |
The Verdict for Startups
Unless you are a solo service provider with no intention to scale, choose the Pte. Ltd. The liability protection, tax benefits, and ability to issue shares and options are worth the modest extra setup cost and compliance overhead.
Indicative Setup Costs
- Sole Proprietorship: from ~S$115 (1 year)
- Pte. Ltd.: S$315 ACRA incorporation, plus corporate secretary and registered office fees
How Gateway of Asia Helps
We advise on the right entity for your goals, incorporate your Pte. Ltd., and — if you started as a sole proprietor — help you convert cleanly to a company as you grow.