Before setting up a Singapore Private Limited company, or Pte Ltd, you should compare the pros and cons of a Singapore Pte Ltd and other forms of business structure.
Structuring your business as a private limited company (Pte Ltd) in Singapore has both pros and cons. Whether a certain feature is an advantage or a disadvantage may depend upon the type of business structure being compared with when creating a Singapore Pte Ltd.
A Pte Ltd is often seen as having the same limitation of liability for owners as a limited liability partnership (LLP), but with more potential tax benefits and less complexity. However, as will be seen, it is not quite that simple. These factors, as well as others, will be discussed in comparison with other ways of structuring a business.
Limitation of Liability
Pte Ltd pros: Owners of an Pte Ltd (called members) are not personally liable for the debts of the business, including debts resulting from most lawsuits against the company. This means that a creditor of the business cannot go after the personal assets (home, car, bank accounts, etc.) of an Pte Ltd member.
A Pte Ltd and a limited liability partnership (LLP) also afford limited liability, but the Pte Ltd has other advantages that will be discussed below. A limited partnership (LP) gives limited liability to the limited partners, but not to the general partners, who are the ones who create and run the business. There is no limitation of liability for a sole proprietor or a partner in a general partnership.
Pte Ltd cons: None.
Pte Ltd pros: For corporate tax purposes, a Pte Ltd enjoys partial tax exemption during the early years of its formation under the Tax Exemption Scheme for New Start-Up companies. The tax exemption scheme for new start-up companies was introduced in the Year of Assessment (YA) 2005 to support entrepreneurship and to grow our local enterprises. It was announced in Budget 2018 that the tax exemption under the scheme would be revised with effect from YA 2020, as other support for companies to build their capabilities have been strengthened. This exemption scheme applies to qualifying companies only for their first 3 consecutive YAs on the first S$200,000 of normal chargeable income*. From the fourth YA onwards, companies can enjoy the partial tax exemption
* Normal chargeable income refers to income to be taxed at the prevailing Corporate Income Tax rate of 17%
Pte Ltd cons: None.
Pte Ltd pros: None.
Pte Ltd cons: A Pte Ltd cannot have more than 50 members. A private company is one whose memorandum or articles of association restricts the right of its members to transfer their shares in the company.
Complexity of Creation and Operation
Pte Ltd pros: Establishing an Pte Ltd is easy and can be completed in hours.
Pte Ltd cons*: Accounting and Corporate Regulatory Authority of Singapore requires that all companies must conduct Annual General Meetings (AGMs) within 6 months after Financial Year End (FYE) and Annual Return to be filed within 7 months after FYE. A Pte Ltd must also hold its first AGM within 18 months after incorporation and subsequent AGMs yearly at intervals of not more than 15 months. A Pte Ltd must prepared financial statements to be tabled at AGM. A Pte Ltd involves more complexity than a sole proprietorship and a general partnership, neither of which is subject to regulatory requirements regarding registration, conduct of meetings, or keeping of minutes.
* The process of AGM and AR are automated at kimbocorp so we will always be prepared to conduct them.
Pte Ltd pros: None. A Pte Ltd offers no advantage in terms of registration costs.
Pte Ltd cons: Singapore filing fees are S$300 to register a new business, S$15 to reserve a company name and S$60 every other year thereafter. The fees for a limited liability partnership (LLP) are $100 to register a ne business, S$15 to reserve a company name and S$30 n.
Registered Filing Agent / Qualified Individual
A registered agent is a person or company that is designated to receive official legal documents for a business, such as lawsuit papers, subpoenas, wage garnishments, and other government notices.
Pte Ltd pros: There is no particular advantage to having a registered filing agent and qualified individual, although it may be a convenient way to be sure that legal documents are received and handled in a timely manner.
Pte Ltd cons: Unlike a sole proprietorship or general partnership, a Pte Ltd is required to have a registered filing agent and qualified individual. If your Pte Ltd hires an outside registered filing agent and qualified individual, it will cost from S$300 to S$3,000 per year, depending upon the agent you hire. One registered agent and qualified individual is also required for every Pte Ltd.
Ability to Raise Capital
Pte Ltd pros: Other than borrowing money, an Pte Ltd may find it easier to raise capital than if it were structured as a sole proprietorship or general partnership. Neither of these other forms of business can take on investors without making them a partner, but it is possible for an Pte Ltd to add new members without giving them a full say in management. A Pte Ltd can issue stock to raise capital. A new investor would need to become a member of a Pte Ltd which is not a complicated process. Many investors would consider LP, LLP and Sole Proprietorships risky and prefer to invest in Pte Ltd.
Banks and other lenders are also more open to loan directly to a Pte Ltd than they would to a LP, LLP or Sole Proprietorship. Members of the Pte LTd may be required to personally guarantee a loan, which eliminates the limitation of liability as to such loans.
Pte Ltd cons: None.
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