How Does Company Incorporation Work?

Businesses often start out through sole proprietorship or partnerships, with the latter leaning more towards an open company or an open business model in recent years. As time progresses and the company grows, business owners looking for a more stable holding as well as a way to expand their business ventures might see company incorporation as a solution.

When a business goes through company incorporation, the company owners register company and in effect create a separate legal entity called an incorporated business or a corporation. This new entity transforms how business is perceived in terms of legal status.

There are at least three types of corporate structures in Singapore: the C corporation, a separate legal entity controlled only by the company’s shareholders; the S corporation, where shareholders enjoy liability protection and certain tax breaks; and limited liability corporation (LLC), where shareholders and company owners are able to bypass double taxation on corporate profits.

Why Incorporation is Important for Small Businesses

Operating as a corporation does have its share of drawbacks, such as having the need for extensive record keeping and administrative detail, or even creating an additional tax burden. However, this shouldn’t stop small business owners from incorporating through company registration.

While many starting business owners and entrepreneurs launch their companies as sole proprietorships, when they opt to register company in Singapore through SGBusiness or any other business registration firms, changing the structure of that small business can offer far greater advantages. For those businesses that will undergo company registration they will enjoy the following benefits:

• It secures protection for personal assets. Applying for company registration for your incorporated company grants you recognition that your corporate assets are separate from your private assets, though more formalities may need to be observed to obtain this.

• It adds credibility to the business. This added credibility comes from the perception of incorporated businesses in legal terms or otherwise as a more stable business entity than the individual businesses that make it.

• Increased ability to raise capital from and for investments. Investors are more attracted to corporate entities because of limited liability, as shares are easily transferable under that type of company structure.
Additionally, share transferring to new investors is more direct and brokerage firms can easily be tapped for larger public offerings.

• A corporation can last indefinitely. Even if ownership or management changes, corporations and LLCs can continue to exist, while sole proprietorships and partnerships can easily end with the death or leaving of an owner or partner.

• Incorporation grants tax flexibility as well as deductible expenses. A limited liability company has the same tax rate as a sole proprietorship while at the same time limiting the extension of liability to one’s personal assets.

While an entrepreneur setting up a corporation is taxed on both the individual and corporate levels, a corporation can avoid double taxation through electing a Subchapter S tax status.

Steps to Company Incorporation

Before undergoing company incorporation, you must first apply for company registration in Singapore. Because an incorporated business, or corporation, is defined as the merging of two or more businesses, there must be businesses entities to merge in the first place.

However, the requirements for incorporating a company can be different from simple company registration, and need to be prepared before the process:

• Choosing the company name – A clever and unique name is important when registering your Singapore company in to ensure easier brand recognition and add value to your assets. Furthermore, if you register company name that’s unique, it is far less complicated to protect compared to more common names and terms.

• Description of principal business activities – Business owners can select up to two principal business activities at most, though you might also need to register company assets for this.

• Appointment of directors and shareholders – Appointing a board of directors is crucial for a business entity made up of two or more entities. For those looking to register company in Singapore for foreigner businesses, at least one director should be present in Singapore.

• Listing a registered office – A registered physical office must be open for at least five hours on any ordinary business day, and also cannot simply be the address of a P.O. Box. Fortunately, there are many available options when it comes to office spaces, including virtual offices. Business owners can even opt for having a license to operate at home, which can be the case with many an open company.

• Constitution Documents – The principles and policies that define how a company is run are referred to and discussed at length in the company’s memorandum and articles of association (M&AA).

To avoid later complications, the best way to go about any decisions on signing legal documents is to seek a second opinion through legal counsel or by an unconnected professional. If there are multiple owners looking to merge their businesses, a meeting should be called for in order to discuss and finalize this agenda.

• Singpass – For locals and residents of Singapore, Singpass works as a national ID that allows you to lodge the application to register company to the Accounting and Corporate Regulatory Authority online via their electronic portal.


Setting up the type of company structure for your business allows you to maximize its output, as well as chances of success in terms of both financial and operational perspectives. The best way to get started is by consulting with an accountant or a company registration specialist.

Having a company registration specialist or an unaffiliated, third-party consultant to help you figure out the best direction for your business will help you and your future co-owners and business partners to continue and expand your ventures.