What You Need to Know About Singapore Private Limited Company
A Singapore private limited company is a business entity that is registered under the Singapore Companies Act. it has a legal identity different from the shareholders and directors. If you are planning to open one in Singapore, it is important that you are aware of the pros and cons that you will have.
It is a business structure that is measurable and dynamic, which is different from other businesses in Singapore. By reading this post, you can also gauge if you still want to push through with it or not.
Here Are the Pros of a Singapore Private Limited Company
The best thing about a private limited company in Singapore is the limited liability it places on the shareholders. This business entity is an independent legal entity. Therefore, it is liable for the loss and debt the business incurs. The shareholder’s liability is only limited to how much they invest when they buy shares.
Registration is Easy
The procedure to set up is easy and you can do it with a couple of easy steps within hours. Those steps you must do to register a private limited company includes name reservation, placing an enquiry, filing the forms to be given together with supporting documents.
Expansion is Not a Complex Process
It is obvious that capital plays an important role when the company wants to expand its business. In this type of company, it is easy to raise funds through business financing, more equity partners, venture funds, and more. The credibility image of this type of company is good and reputable. Securing a fund loan or coming from the bank is quite easy for a private limited company based in Singapore. The investors or potential shareholders have a higher tendency to invest money for a company.
Reasonable Tax Rates
Singapore’s tax rates are lower than the individual tax rates. Since it is a legal entity that is different from individuals, these companies enjoy good tax rates and they can save money on taxes. These are what they would have been required to pay if they had a sole proprietorship type of business. The private limited company in Singapore is tax efficient. It will enjoy a lot of benefits when it comes to tax rebates, policies, and schemes. The corporate tax rate is at 17% of your profit is more than 300,000.
A private limited company in Singapore can be there perpetually. If there are changes in the shareholders’ membership, it will not have an impact on the company’s existence. The company may continue even if any of the shareholders die, resigns, or becomes insolvent. Other kinds of business entities in Singapore do not have perpetual succession, which means that if the partner or sole owner is dead or does not want to continue the business, it will cease to exist under the Singapore Companies Act.
Foreigners Are More Drawn to It
The big investors and financial institutes such as banks prefer to loan money to private limited companies compared to partnerships or sole proprietorships. They see credibility in this company. The customers should be drawn to their branding.
Start-up Tax Exemption Scheme
Singapore governments are supportive of startups. Under Singapore’s tax exemption scheme for new startups, the local business has:
- A 75% tax exemption during their first $100,000 normal chargeable income
- A 50% tax exemption on the next $100,000 normal chargeable income
Cons of a Private Limited Company
Cumbersome Process of Collecting Requirements
Setting up a private limited company in Singapore is cumbersome because the requirements are strictly according to the Singapore Companies Act. Business owners must comply with them no matter what.
Tighter Rules to Follow
They are governed by tighter regulations and rules in comparison to partnerships. For instance, they should follow rules and procedures that are set out in the Companies Act. The company accounts should show more information in comparison to the partnership accounts and they need at least one director and company secretary.
Cost to Set It Up and Growth Maintenance Could Be Higher
There are a lot of formalities and statutory procedures that must be kept the same. Those are pre-incorporation and post-incorporation that must be followed. There are also annual filing requirements that should be done.
Greater Requirements for Disclosure and Administration
This is in comparison to partnerships. Therefore, the company running costs are higher compared to a partnership. For instance, they should file yearly audited accounts or Directors or FRS. They must report if they are exempted from the auditing and returns with the ACRA, with penalties in case they are late. These could be made publicly available.
Statutory Requirements to Comply With
Since they mandate statutory compliance requirements, hiring a bookkeeper, accounting services, and corporate secretarial services can be expensive.
Liquidation Process is Lengthy
Ceasing the consequent and trade strike-off process to dissolve a private limited company is harder and more expensive. The legal compliance that should be done is intricate and the cost to process it is also high because experts should be hired from an accounting services provider.
Higher Administrative Burden
Running a private limited company needs continuous and consistent administrative efforts. It needs qualified employees and the operational costs are high. Even the cost to set up and run a private limited company is more than if you have a partnership or sole proprietorship.
Minimum Requirements to Setup a Private Limited Company in Singapore:
- There should be at least one local director who is Singapore’s ordinary resident. The person can be Singapore’s permanent resident (PR), citizen, or has an Employment Pass or Entrepreneur Pass (EntrePass).
- The shareholders could range from 1 to 50. There is no mandatory requirement that the shareholder must be a Singapore resident. A foreigner can have 100% of the shares.
- There is a registered local address, and it should be a physical one and not a P.O. box.
- The minimum paid-up capital must be at least SGD1. The amount should be S$50,000 for an EntrePass holder owned company.
- Appointing a company secretary within 6 months from the company’s incorporation date is mandatory. The company secretary should designate a natural person who lives in Singapore.
Before setting up a private limited company in Singapore, always consider the pros and cons, so you can gauge if you still want to or not. You can get the assistance of 3E Accounting because they are the incorporation experts in Singapore.