When setting up a business enterprise in Singapore, it is imperative that you chose an entrepreneurial vehicle that will help you achieve your long term objectives. Thus, the corporate structure of the business you choose is vital. It determines how quickly you can grow your business to the next level.
Private Limited Company
What is a Private Limited Company?
A private limited company in Singapore is a limited liability entity whose shares are held by a maximum of 50 people. The shares of such a company should not be available to the general public to buy.
Such businesses must have the abbreviations Pte Ltd at the end of their name. The law allows corporates and/or individuals to own shares in the limited liability company.
If you own shares in such a company, the limited liability clause protects you from being liable for debts incurred by the company beyond the number of shares you hold.
Benefits of a Private Limited Company
Limited liability implies that the liability of the shareholders is only limited to the amount of capital they contributed.
In cases where the business is unable to pay its debts, the liability of the shareholders cannot be extended beyond the amount of money they contributed as capital.
The existence of a private limited company is not dependent on the life and survival of its shareholders. Ownership of shares can be transferred to any other party at their wills.
This ensures that the company will thrive and continue to transact business even when a director or a shareholder resigns, dies, or is declared insolvency.
It is easier for a private limited company to raise money for its day to day operations or any other purpose.
All the company needs to do is to bring in a new shareholder if the existing number of shareholders is less than 50. Alternatively, the company could issue more shares to the current shareholders. Note that it is easier for a private limited company to attract new shareholders because of it’s limited liability clause. The clause separates personal assets from business assets.
Banks are also more willing to loan money to a limited liability company because they can quickly recover the money lent by attaching the assets of the company.
It is much easier to transfer ownership of a private limited company to another person without disrupting the operations of the business.
The transfer could be partially or fully. There is also no complex legal documentation to be pursued.
The business can accomplish this by issuing additional shares to the existing shareholders or inviting new shareholders into the business.
The tax rate in Singapore favors private limited companies.
A 9% tax is placed on profits leveled up to a maximum of SGD 300,000 and 17% tax is charged on profits exceeding SGD 300,000.
The Singapore government pursues the popular single-tier tax policy. Thus, startup businesses are exempted from capital gain tax. The policy requires that once the taxman taxes the income at the corporate level, it will be distributed to the shareholders without being taxed again.
Comparing the Pros and Cons of Private Limited Company
The Registration Process of a Private Limited Company in Singapore
The first thing the entrepreneur needs to do is to register with ACRA. This is a statutory board under Singapore’s Ministry of Finance and is responsible for registering all businesses.
The following details are required for the registration:
- Name of the company secretary
- Name of at least one director (must be a resident)
- One shareholder (could be a corporate entity or an individual)
- A physical office address (P.O Box is not acceptable)
- At least one paid-up share capital with minimum of SGD$1
The below information and documents are required for smooth business registration.
The name should be unique. Chose a name that will help you build a reputable brand. Note that Singapore law forbids using a corporate name that is deceptive or undesirable. It also forbids using names that are confusing or similar to existing corporate names or trademarks.
Document describing Business Activities
Refer to the Standard Industrial Classification Code 2010 for more information. The code will guide you on the type of activities the business should engage in.
Pattern of Shareholding
One or more of the shares must be issued to the initial members.
A document which helps to avoid future disputes.
At least one shareholder ( individual or corporate) have to provide own details for formation of a private limited company.
Director should be a citizen, a pass holder or a permanent resident of Singapore.
Company Secretary Details
Company secretary must be put in place within six months upon the company’s incorporation.
Registered address must be a physical address.
Memorandum & Article of Association
The document specifies the activity the business will engage in. It outlines the rules that govern the company’s internal management.
Company Business Profile
The document confirms that the business has been incorporated.
The certificate proves shared ownership.
Certificate of Incorporation
The certificate can be purchased.
First Board Resolution Minutes
The document appoints the shareholders and the directors that will serve as the officials of the business.
Account Opening Resolution Minutes
The document sanctions the opening of the business bank account.
How Timcole can Help You
Timcole is one of the leading company incorporation and accounting firm based in Singapore. Our wide range of professional services serve as a one-stop solution for your business, offering you the most affordable price for services conducted with the highest level of excellency.
Contact us to find out more on how we can help you with your company today.