September 15, 2010 - There are three business models which foreign business owners, shareholders, and companies can use in order to effectively and legally operate in Singapore namely: a subsidiary company, representative office, and branch office which have their own purposes and goals.
According to the leading Singapore Subsidiary Company registration company AsiaBiz, it is vital for foreign entrepreneurs to correctly set their objectives before adopting the type business model they want to operate.
“Each of these business models has a specific purpose which ideally should be thoroughly considered in order to ensure a successful company or auxiliary entity in Singapore, AsiaBiz spokesman said during an interview.
For entrepreneurs planning to conduct in market research, the firm believes that a Singapore representative office is usually the most ideal, particularly for foreign company owners who are not yet sure of the viability of their business in the country.
It is important however to note that a representative office is prohibited to engage in any activities that will generate revenue since it is not considered as a business entity per se.
Generally, this auxiliary office is seen as a short-term arrangement since the government does not allow this to operate for more than three years as it deems that this period is enough for foreign companies to determine the profitability of their services or goods.
According to AsiaBiz, a representative office may upgrade to a subsidiary company or branch office if it wants to continue its presence in the country and engage in a full-blown operation. However, the company said that these two business models have differences that must be considered.
First, a subsidiary company is allowed to engage in any business activities unlike a branch office which should only perform the undertaking of its parent company.
Another difference is that a subsidiary company is treated as a separate legal entity from its main office unlike a branch office which is considered as an extension of its parent company. With this arrangement, a branch office does not enjoy local tax benefits while a subsidiary company is eligible for these advantages.
Also, a foreign company with a branch office is legally liable for the latter’s losses, liabilities, and debts. This is not the case for a subsidiary office in which its parent company enjoys limited liability protection.
“Because of the advantages of being a subsidiary company, most foreign entrepreneurs, investors, and business organizations prefer this model over a branch office,” AsiaBiz said.
However, note that that foreign businessmen are prohibited to self-register their own Singapore company which means they are required to hire a professional firm that will conduct the processes involving business registration.
More information on how to form a Singapore company. AsiaBiz has successfully helped thousands of foreign entrepreneurs who wish to form a Singapore company by securing their work visas using employment pass route once they have incorporated a Singapore Company.
For more information:
address: 120 Telok Ayer Street Singapore 068589
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