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.
Foreign Business Organizations Guide to Forming a Company in Singapore
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