Startup Structures in Singapore: Exempt vs. Non-Exempt Explained

Choosing the right legal structure is a critical step for startups in Singapore. With its pro-business policies and clear regulations, Singapore provides several company types that support growth while ensuring compliance. Among these, the private limited company is the most popular choice. However, many founders struggle to understand the distinction between exempt and non-exempt companies, which directly affects reporting requirements and long-term strategy. Clarifying these differences is essential to set the foundation for success and avoid unnecessary risks. 

This article will break down the definitions and features of exempt and non-exempt company structures so that aspiring business owners can make informed decisions. Read on for key insights.

Overview of company structures in Singapore

Singapore offers a range of company structures to suit different business needs. Understanding these options is essential for startups to align with their growth plans and compliance obligations. The most common forms are sole proprietorship, partnership, and private company limited by shares.

Sole proprietorship

A sole proprietorship is the simplest structure, owned and controlled by a single individual or a registered company. It is quick and inexpensive to set up, but it offers no legal separation between the owner and the business. This means the owner is personally liable for all debts and obligations. For small-scale, low-risk ventures, this structure can be practical, but it limits the ability to raise capital and scale effectively.

Partnership

A partnership involves two or more individuals or entities running a business together. In Singapore, partnerships can take the form of a general partnership or a limited liability partnership (LLP). A general partnership, like a sole proprietorship, does not separate business and personal liabilities. By contrast, an LLP provides some liability protection by treating the business as a separate legal entity while allowing operational flexibility. Partnerships are often used for professional services firms and collaborations where shared ownership is key.

Private company limited by shares

The private company limited by shares is the most popular choice for startups in Singapore. This structure creates a separate legal entity, which shields shareholders from personal liability beyond their share capital. It also enables the company to enter into contracts, own property, and sue or be sued in its own name.

Startups favour this structure because it is more credible to investors, allows for scalable growth, and meets the statutory requirements for tax exemptions and other government incentives. A private limited company can have up to 50 shareholders, making it suitable even as the business expands.

Why most startups choose a private limited company

Most startups choose a private limited company because it strikes the right balance between liability protection, growth potential, and regulatory compliance. It is also the only structure that meets the requirements for Singapore’s attractive corporate tax exemptions for qualifying new companies. With strong investor confidence and clear governance standards, a private limited company positions startups well for long-term success.

What is an exempt private limited company in Singapore (EPC)?

An exempt private company (EPC) is a category of private limited company defined under the Singapore Companies Act. It offers smaller, closely held businesses reduced compliance obligations while preserving the advantages of a separate legal entity. This makes it a preferred option for many startups and small businesses looking to balance regulatory simplicity with credibility.

Definition under the Singapore Companies Act

An EPC is essentially an exempt private limited company in Singapore with additional restrictions on ownership. To qualify as an EPC, the company must meet two statutory conditions. First, it can have no more than 20 shareholders. Second, none of those shareholders can be a corporate entity; they must all be individuals acting in their personal capacity. These rules ensure the company remains tightly controlled and not influenced by corporate shareholders. 

The EPC structure is designed to accommodate businesses that are family-owned, founder-driven, or operated by a small group of individuals.

Key criteria to qualify as exempt

To summarise, a company must satisfy both of these conditions to hold EPC status:

• A maximum of 20 shareholders at any given time
• No corporate shareholders, meaning ownership rests solely with individual persons

Failing to meet either of these criteria means the company automatically becomes a non-exempt private company, which has stricter compliance obligations.

Advantages of EPC status

One of the key benefits of EPC status is eligibility for audit exemption. Under Singapore’s “small company” framework, introduced in 2015, a private company can be exempt from annual audit if it meets at least two of the following three criteria: annual revenue of SG$10 million or less, total assets of SG$10 million or less, and no more than 50 employees. EPCs are automatically considered private companies, so they can qualify for this exemption if they meet the financial thresholds. This significantly lowers administrative costs.

Another advantage is greater privacy. Solvent EPCs are not required to file full financial statements with the Accounting and Corporate Regulatory Authority (ACRA). Instead, they can file a solvency declaration confirming their ability to meet debts as they fall due. This allows business owners to keep sensitive financial information confidential.

EPCs also enjoy simplified compliance processes, such as the ability to pass written resolutions without holding formal meetings. These benefits make EPCs especially attractive to startups seeking cost efficiency and ease of management while retaining the liability protection of a private limited company.

What is a non-exempt private company?

A non-exempt private company is a private limited company that does not meet the specific criteria required to qualify as an exempt private company (EPC) under the Singapore Companies Act.

While it still enjoys the fundamental benefits of a private limited structure — such as limited liability and a separate legal entity — it is subject to higher compliance and reporting obligations compared to an EPC. This structure is more suitable for businesses with wider ownership or those involving corporate shareholders.

Definition of a non-exempt private company

A non-exempt private company is simply a private limited company that has lost its EPC status. Unlike an EPC, it is allowed to have corporate shareholders or a larger number of shareholders. However, it remains a private company as long as its shares are not offered to the public and it does not have more than 50 shareholders.

This distinction is important because it still limits external ownership while facilitating more flexibility in attracting investors or structuring ownership through corporate vehicles.

When a company becomes non-exempt

A company becomes a non-exempt private company once the number of individual shareholders exceeds 20; the company no longer qualifies as an EPC and automatically becomes a non-exempt private company. Even if the number of shareholders remains at or below 20, introducing a corporate entity as a shareholder disqualifies the company from EPC status.

These changes often occur when a business grows beyond its initial founding team or seeks investment through corporate vehicles such as venture capital funds or holding companies.

Implications for compliance and reporting

Losing EPC status brings additional compliance and transparency obligations. Non-exempt private companies are generally required to prepare and file full audited financial statements annually, regardless of their revenue or asset size.

These statements must be lodged with the Accounting and Corporate Regulatory Authority (ACRA) and become part of the public record. This increased level of disclosure helps ensure accountability, especially for companies with more complex ownership structures.

The administrative burden and costs of compliance are higher for non-exempt companies, making them more suitable for businesses that need the flexibility of corporate ownership or expect significant external investment. Understanding these implications allows founders to plan their ownership structure and growth strategy while remaining compliant with Singapore’s legal and regulatory framework.

Exempt vs. Non-Exempt companies

Here’s a side-by-side comparison to help founders choose the right structure based on ownership, compliance, and cost:

For founders looking to remain small, maintain privacy, and reduce compliance costs, an EPC is often the preferred choice. However, if you plan to bring in corporate investors, exceed 20 shareholders, or strategically scale the business, converting to a non-exempt private company is likely necessary, despite the additional reporting obligations.

Understanding these key differences will ensure you choose a company structure that supports both growth ambitions and operational efficiency within Singapore’s legal framework.

How to incorporate and maintain compliance

Registeringa company in Singapore is a straightforward process, but it is important to follow the right steps and stay compliant to avoid penalties or delays. Whether you choose an exempt or non-exempt private company, the registration process is largely the same.

Steps to register either structure

Start by choosing a unique company name and getting it approved by the Accounting and Corporate Regulatory Authority (ACRA). Next, prepare the necessary documents, including the company constitution, details of directors, shareholders, and the company secretary. You must also decide on your share capital and registered office address. 

Once submitted through ACRA’s BizFile portal, most companies can be incorporated within a day. At this point, your company type, whether exempt or non-exempt, will depend on the shareholder structure you register.

Common mistakes to avoid

Many founders overlook compliance when setting up, which can lead to unnecessary costs or even regulatory breaches. Common mistakes include appointing unqualified directors or secretaries, failing to maintain a proper register of members, and assuming audit exemptions without checking if small company criteria are met. In addition, making sure that your structure matches your future ownership and funding plans can also save the need for restructuring later.

Annual obligations to keep in mind

After incorporation, both exempt and non-exempt companies have ongoing compliance requirements. These include holding an annual general meeting if applicable, filing an annual return with ACRA, and maintaining accurate financial records. Solvent EPCs can file a solvency declaration in place of full financial statements, but non-exempt companies must file audited statements publicly.

By understanding the process and staying on top of annual obligations, founders can build a strong foundation while staying compliant with Singapore’s regulatory standards.

Form your Singapore business with BBCIncorp expert services

Whether you decide on an exempt or non-exempt private company, setting up and running your business in Singapore requires expert guidance. Local regulations can be complex, and ensuring that every step is handled correctly, from incorporation to ongoing compliance, is crucial for your success. Having a trusted professional team helps you avoid costly mistakes, stay aligned with legal requirements with ease and efficiency.

With BBCIncorp, you gain access to a full suite of corporate services tailored for your specific needs. These include company incorporation, assistance with opening corporate bank accounts, provision of corporate secretary services, accounting, auditing, nominee directors, and more. Every aspect of your business is supported by professionals who understand Singapore’s regulatory landscape and your business goals.

Partnering with BBCIncorp means you can move forward confidently, knowing that every detail is managed efficiently and in compliance with the law. Thus, you can enjoy various benefits from their solution partner as well (e.g., cashback, discounts, free exchange fees, etc.)

Get in touch with BBCIncorp today or visit their Singapore company service site to start your business journey with expert support from day one

Conclusion

Exempt and non-exempt private companies each offer clear benefits for businesses in Singapore. An exempt private company suits smaller, owner-managed businesses seeking lower costs and privacy, while a non-exempt private company works better for those planning to expand ownership or bring in corporate investors. Both provide strong legal protection and credibility in a business-friendly environment.

No matter what choice you take, BBCIncorp is ready to guide you through every step, from incorporation to ongoing compliance support. Contact BBCIncorp today at service@bbcincorp.com and start your Singapore business with confidence.

Contact information:

Organization: BBCIncorp

Website URL: https://bbcincorp.com/

Email: service@bbcincorp.com

BBCIncorp’s Headquarters in Hong Kong:

Address in Hong Kong: Office 3906, 39th, The Center, 99 Queen’s Road Central, Central, Hong Kong

Phone in Hong Kong: (+852) 9889 3529

BBCIncorp’s Office in Singapore:

Address in Singapore: 9 Raffles Place, #29-05 Republic Plaza, Singapore (048619)

Phone in Singapore: (+65) 6011 8200

BBCIncorp’s Office in Vietnam:

Address in Vietnam: 39-41 Ngo Thi Bi Street, Him Lam Area, Tan Hung Ward, Ho Chi Minh City

Phone in Vietnam: 18006338

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