The private limited company incorporated under the Singapore Companies Act is the country’s most common form of business organization. The liability of a limited company is limited to its share capital, while the liability of its owners is limited to the amount of money they have contributed. A limited company can be either private or public.
Private Limited Companies (PLCs) are the most common type of limited companies in Singapore, and with good reason. They have gained immense popularity because of their multiple benefits over other limited companies, such as limited partnerships and sole proprietorships.
Let’s discuss the benefits of forming a private limited company in Singapore.
Benefits of Forming a Private Limited Company in Singapore
Private limited companies in Singapore are formed under Chapter 50 of the Singapore Companies Act. In addition, the Accounting and Corporate Regulatory Authority (ACRA), often known as the Singapore Company Registrar, controls the procedures for establishing a company in Singapore.
Considering Singapore has numerous business entities, and each requires specific annual regulatory compliances. Hence, individuals and businesses often seek reliable incorporation services like A.1 Business to help set up their entity in a timely manner. You can learn more about the agency’s services and expertise by visiting http://www.a1corp.com.sg/.
Here are five advantages of establishing a Singapore limited liability company.
1.Private limited companies enjoy substantial tax benefits
Singapore’s business tax rate is competitive at 17% tax on chargeable income up to S$200,000. Moreover, several tax exemptions are available for newly registered businesses and partial tax breaks for established businesses. New companies get tax breaks like exemptions of 75% on the first $100,000 of their regular chargeable income and 50% on the next $100,000 of regular chargeable income.
Further, incomes taxed at the corporate level in Singapore are not subject to further taxes in the hands of shareholders since the country has a single-tier taxation structure. The owners and shareholders of a limited liability company do not pay taxes on dividends, leading to a tax-free income.
2. It’s easy to transfer ownership
It is possible to transfer 100% or a percentage of the ownership of a private limited company. A transfer of ownership can occur by selling existing shares or issuing new ones to new investors.
Let’s say a shareholder or business owner decides to pull out of the company because of a disagreement or inability to reach a compromise. In this case, one or more shareholders can then choose to liquidate their holdings and sell the company or their shares to other shareholders. As a result, this won’t interfere with the company’s operations and could even lure new investors to the business (since new shares will be available).
3.You’re likely to experience less legal issues with this structure
Starting a business might be challenging if you do not have a legal background or a competent attorney to assist you with all the legal requirements. Despite the significance of paperwork, several procedures must be completed to guarantee that your company complies with all applicable rules and regulations.
A private limited company in Singapore is not required to have several shareholders. Even if you incorporate more shareholders, they will have a distinct identity from you, the owner. Any problems with debt, violation of contract, or other wrongdoing by the shareholders are considered separate from the corporate entity, owners, and vice versa.
4.This business structure lessens your risk exposure
Your limited liability company is a private legal organization. This indicates that the liability of owners and shareholders is limited to the share capital they bought or held shares that are deemed paid, unpaid, and partially paid by them. Shareholders’ and owners’ private property is kept separate from the company’s.
In contrast to limited liability companies, the owners of sole proprietorships and partnership structures (regardless of whether they’re general or limited liability partnerships) have unlimited personal liability for the organization. Personal assets and property of owners are at risk if enterprises with this structure are sued or go bankrupt.
Let’s say a Singaporean firm has financial difficulties and cannot meet its debt commitments. In such a scenario, the private assets and properties of the company’s owners or shareholders could be used to settle the debt owed to the financial institution.
5.Private limited companies can easily raise capital
Due to its separate legal identity, it is easier for a private limited company in Singapore to acquire capital than other business structures. Besides acquiring loans from banks and other institutions, private limited companies can obtain funds from other sources. For instance, a limited company can issue more shares to increase its capital, attracting additional investors to the Singapore company.
In contrast, a private company controlled by a lone owner or two or more partners relies on personal assets to acquire capital and frequently pays a premium to secure borrowed capital.
Additionally, the structure of a private limited company makes it simple for shareholders and owners to transfer their equity for additional investment or to issue more shares.
Private limited companies are the most popular business structures in Singapore. It is ideal for business owners who wish to register a company in Singapore because it is a dynamic, credible, and scalable structure that meets the requirements of a growing company.
When deciding on a legal structure for a new company, branch office, or other private company in Singapore, local or international business owners should consider the private limited company structure, provided it meets their specific needs.