There are generally 5 types of business structures you can choose from if you’re starting a new business for profit:
Sole-proprietorship
General Partnership
Limited Partnership (LP)
Limited Liability Partnership (LLP)
Limited Liability Company (LLC)
To decide which business structure is most suitable for you, you will need to consider the following factors: –
How much capital you are prepared to invest?
How many owners there will be in the business?
What liabilities and responsibilities you are prepared to assume?
What risks you are prepared to take?
Whether a company of that structure will be easy to close?
Some of the main features of a Limited Liability Company include the following: –
Limited Liability Company (LLC):
Once a partnership comprises more than 20 partners, it must be registered as a company under the Companies’ Act.
An LLP is a separate and distinct legal entity. As such, it is entitled to sue and be sued in its own name or own land in its own name.
In addition, it has perpetual succession (i.e. it will not terminate or dissolve upon the death or departure of the owners) and can continue to exist and operate upon the death or departure of the owners without having to transfer property whenever there is a change of its ownership.
A company’s liabilities are limited to the amount of share capital raised.
The liabilities of the company’s owners are limited to amount of their assets in the company and their personal assets are protected from the company’s debts and business liabilities.
There are 2 types of LLCs:
Private Limited Company
Public Limited Company
Private Limited Company:
Denoted by the “Pte Ltd” or “Ltd” suffix after the company’s name, this is the most common type of LLC.
The company’s shares are held by a maximum of 50 shareholders and the shares are not made available to the general public.
This type of business structure is often chosen by business owners because of the following advantages:
It has a separate and distinct legal identity from that of its owners or members.
It has limited liability up to the amount of its share capital raised.
It has perpetual succession which allows it to easily transfer shares and ownership
It is generally regarded as being more stable and qualifies for most, if not all, financial support, grants or incentive schemes provided by financial institutions and the authorities.
Public Limited Company:
The company’s shares may be held by more than 50 shareholders and the shares may be made available to the general public.
It is subject to more stringent rules as the company is entitled to raise funds from the public.
This business structure is usually used by larger businesses including those listed on the stock exchange.
