The majority of foreign entrepreneurs have chosen to register a Singapore Private Limited Company for its distinct features compared to other business structures.
Let’s find out what the benefits of private limited companies are, and eventually, how you can establish one in Singapore.
1. The Concept of a Private Limited Company in Singapore
There are many types of limited companies in Singapore. However, the two most common ones are private limited companies and public limited companies. The registration of a private limited company is more straightforward.
A private limited company is a company that is privately owned by a maximum of 50 shareholders, who can be either individuals or corporations. On the other hand, a public limited company can go beyond 50 shareholders.
A private limited company in Singapore cannot issue shares to the public to raise capital.
2. Advantages of a Private Limited Company in Singapore
A private limited company in Singapore can offer you a wide range of benefits. That’s the reason why most foreign investors have chosen this type of company.
Separate Legal Status
A private company is considered a distinct legal entity in Singapore. The company has a separate personality from the owners. This feature is associated with a high degree of asset protection.
The company can enter agreements, purchase and sell property, sue, and be sued under its owned name.
Members’ Limited Liability
Due to the company’s distinct legal personality, as a shareholder, your personal assets will be safe from the company’s potential claimants and creditors.
In case of insolvency, all the shareholders lose is their owned shares. They will not hold any further personal liability for any debts caused by the company.
A private limited company is subject to a Singapore corporate tax rate of 17%. Compared to other developed countries, the tax rate in Singapore is rather low.
In addition, a private company is eligible for many tax-cut schemes. One of the most common schemes is the Partial Tax Exemption Schemes. With this scheme, a company can be entitled to a 75% exemption on the first $10,000 of income and another 50% exemption on the next $190,000. The maximum exempt amount can go up to $102,500.
Not to mention a private limited company can automatically receive an annual tax rebate. The rate is different each year, according to the decision of the Singapore government. The rate of tax rebate in 2020 was 25%, for example.
The income of a private company that is earned from foreign sources can also be exempted from being taxed in Singapore. However, certain conditions need to be satisfied first.
Ease of Ownership Transfer
The ownership of a private limited company can be partly or wholly transferred from one to another by transferring shares. This is one of the reasons why foreign investors prefer this business entity.
High Degree of Corporate Anonymity
Under a private limited company, you don’t have to publicize the details of shareholders on incorporation papers. Moreover, you can use the nominee services to keep the business more confidential.
Many investors will only start their investment in a company with a high level of secrecy.
3. How to Set Up a Private Limited Company in Singapore
The process of registering a private limited company in Singapore is rather quick and easy. The Accounting and Corporate Regulatory Authority (ACRA) is the government agency that is responsible for the company incorporation within the border.
Typically, there are some key requirements you must fulfill for the registration. Those are:
- Having a director who is locally resident in Singapore;
- Registering a local office address in Singapore;
- Appointing a company secretary within 6 months;
- Appointing an auditor within 3 months.
If you have chosen a third party to do all registration steps for you, all you need to do is just supply the required information. Particularly, ARCA will require the following documents and information:
- The approved company name;
- The description of the main business activity;
- The detail of the local office address in Singapore;
- The company’s constitution;
- The particulars of directors;
- The particulars of the company’s members/shareholders;
- The particulars of the company secretary (if any).
Note that your desired company name must be the unique one in the Singapore company register. Choosing the company name must follow ARCA’s regulations.
After filing the application, the service provider will send it to ACRA on your behalf. The processing time is rather quick, within a couple of days or even faster.
However, if the application needs further review from another government agency, the time can be extended to a couple of weeks. The result will be then sent back via email.
You can do the company registration by yourself. Incorporating your Singapore company with a trusted service provider will make things easier for you. If everything runs smoothly, your company in Singapore can be established within just 1 day.
4. Post Incorporation
After you receive the certificate of your Singapore company registration, there are a few more steps to legitimate the company and smoothen the operations.
Opening a Corporate Bank Account
It is crucial to obtain a business account for your Singapore private limited company. The account will help you keep track of the business tractions. Your company can efficiently receive payments from business partners and customers.
However, Singapore banks may request strict verification and face-to-face interviews for the account opening. This makes many of you have trouble obtaining a Singapore bank account.
The incorporation service provider can also support you with a bank account application for a fee. They will give you advice on what bank to choose, submit your application, and schedule an interview between you and the bank (if the application is approved). It’s even better than they can actually help you to open a business account online with no hassle.
Applying for Business Licenses and Permits
Companies incorporating in certain business fields need to obtain further licenses before they can actually start their operation. Some typical business fields are construction, real estate, education, employment, food, and beverage.
If your company doesn’t meet licensing requirements, your business will face a penalty or be forced to close the business. You should consult the professionals or official departments to see whether your company is in need of additional licenses.
Singapore private limited company is a highly recommended entity. Pick your desired business sector and make it profitable with this type of company in the country. The main reason is that it has a distinct legal status, so its members have limited liability only to their shares.
In addition, such a company type can bring you a lot of tax benefits that can help you cut off the payable taxes.
Singapore has the ideal ecosystem for startups, which attracts entrepreneurs around the world for company incorporation. Still, the registration might frustrate you as a newcomer. A company formation service will relax your worries.