After deciding to incorporate a company, the next thing you should focus on is what type of company to opt for. In Singapore, you can set up a sole proprietorship, public limited company, and private limited company, among others.
As private limited companies are usually the most common structure in Singapore due to their flexible nature, This article explores some of the advantages of starting one in Singapore.
You don’t need to share profits
One of the most important goals of any business is to maximize profits. If you’ve just started your own venture, the last thing you would want is to give up part of those profits to other parties, unless you choose to do so.
If you start a private limited company, this would be the least of your worries as you wouldn’t need additional shareholders who require a portion of your company’s profits. Conversely, with a public limited company, there have to be at least 50 shareholders and the company’s shares must be made available to the public.
Less legal mess
Unless you have a legal background or a good lawyer to assist you, it can be tricky to handle all the legal matters on your own when starting a business. While paperwork is important, you’ll also need to work through many formalities to ensure your company isn’t violating any laws or regulations.
There is no requirement for a private limited company to have multiple shareholders. However, if you decide to include additional shareholders, they will have a separate identity from you, the owner. Any issues of debt, breach of contract, or other misconduct by the shareholders are considered separate from the business entity, business owners, and vice versa.
Attractive tax exemptions
In Singapore, private limited companies enjoy certain tax exemptions that aren’t afforded to all types of companies. For example, in a sole proprietorship, any income earned is seen as personal income, meaning they will be subjected to higher tax rates of up to 22%. Whereas, with a private limited company, you’d be charged the corporate tax rate–a flat 17%.
But that’s not all! New startups get to enjoy tax rebates such as a 75% exemption on the first $100,000 of normal chargeable income and a further 50% exemption on the next $100,000 of normal chargeable income.
Easy to transfer ownership
Private limited companies are popular due to their flexibility, and this advantage is much needed when structural changes become necessary within the company. If a shareholder wants to give up their stake in the business, they may sell their shares to someone else and move on without much fuss.
Shareholders also have the option of transferring their shares, partially or wholly, albeit at a lesser value if that is something they would prefer. The process of transferring shares is straightforward. The shareholder requires that the following documents are presented in order–the intent of transfer, a notice of transfer, share certificate, and share transfer form–and then attain a stamp duty acknowledgment from the Inland Revenue Authority of Singapore (IRAS).
Lesser risk exposure
Essentially, a private limited company works as a safety net for a business owner and shareholders, reducing the risk of these stakeholders being held responsible for the actions of the company.Rather, those risks are mitigated as the shareholders and owner:
(i) retain their own identity that is separate from each other and the company
(ii) will not personally be responsible for legal wrongdoings by the shareholders
(iii) will not have to worry about their assets being seized if the company defaults or declares bankruptcy
There are many other advantages to starting a private limited company in Singapore. If you would like to learn more, please reach out to us today!.
FAQs in Private Limited Company in Singapore
- The minimum paid-up capital for registration of a Singapore Company is S$1
- Under Singapore law, a private limited company must have at least one director.
- There are many advantages to a private limited company, including attractive tax exemptions, lower risk exposure for business owners, more.
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