A private limited company or PTE Ltd company in Singapore is a popular business structure. Aspiring business owners who want to register a company in Singapore use it. It is a dynamic, credible, and scalable structure that meets the requirements of a growing company.
A private limited company, or Pte Ltd, is formed in accordance with Chapter 50 of the Singapore Companies Act. The Accounting and Corporate Regulatory Authority (ACRA), Singapore’s Company Registrar, governs the company formation process in Singapore.
It is a measurable and dynamic business structure that is distinct from other businesses in Singapore. By reading this post, learn about the pros and cons of a registered business in Singapore to determine what’s best for you.
Pros of a Registered Company in Singapore
The best feature of a Singapore private limited company is the limited liability it imposes on its shareholders. This commercial entity is a separate legal entity. As a result, it is liable for the business’s loss and debt. However, the liability of the shareholder is only limited to the amount invested when purchasing shares.
More Funding Opportunities
Every year, more than 50,000 new businesses are established in Singapore. However, many businesses find it challenging to get funding during their start-up years because their level of operations or business activity may need to be higher.
Depending on your legal designation, obtaining funding for your business entity can take time and effort. But, if you are a private limited company, funding opportunities are more significant and more accessible.
Only private limited companies are eligible for government-backed microloans offered by local banks such as DBS, OCBC, and UOB. However, the Standards, Productivity & Innovation Board (SPRING Singapore) and International Enterprise Singapore (IE Singapore) are supporting these loans, which are aimed at providing affordable funding schemes for small and medium-sized businesses.
Registration is Easy
The setup of company registration in Singapore is relatively simple compared to any other country. You can complete it in a few simple steps within hours. The steps required to register a private limited company include reserving a name, submitting an inquiry, and filing the forms provided along with supporting documentation. You can go through our detailed blog on steps to register a company in Singapore for more details.
A Singapore private limited company can exist indefinitely. Changes in the shareholders’ membership will not affect the company’s existence. Even if one or more shareholders die, resign, or become bankrupt, the company may continue to operate. Other types of business entities in Singapore do not have perpetual succession, which means that if the partner or sole owner dies or does not want to continue the business, the Singapore Companies Act states that the company will cease to exist.
However, it is critical for partnerships to remain harmonious because it will only be possible to carry on business if one partner chooses to terminate the partnership. The actions are dependent on the clauses set out in the partnership agreement.
Depending on your business needs and future plans, consider a more flexible business entity, especially if you intend to stay or maintain the business in the long run. Alternatively, if your company is currently a sole proprietorship or partnership, you can convert it to a private limited company. Again, a professional services provider will be able to help you with all of the necessary steps.
Singapore’s tax rates are lower than those of individuals. Because it is a legal entity distinct from individuals, these businesses benefit from lower tax rates and can save money on taxes. These are the fees they would have had to pay if they had operated as a sole proprietorship. Singapore’s private limited company is tax efficient. It will reap numerous benefits in terms of tax breaks, policies, and schemes. If your profit exceeds $300,000, the corporate tax rate is 17%.
As a result, above a certain income level, sole proprietorships and partnerships, limited partnerships, and limited liability partnerships may be subject to a higher tax rate.
Furthermore, only businesses are eligible for the Singapore government’s attractive tax breaks. Multinational corporations that establish their regional headquarters in Singapore can take advantage of the Regional Headquarters Award, which provides a 15% tax break for companies that meet the minimum requirements by Year 3 of the incentive period for the next two years on incremental qualifying income from abroad.
Expanding the business is simple.
When a company wants to expand its operations, it is evident that capital is essential. It is simple to raise funds in this type of company through business financing, more equity partners, venture funds, and other means. This type of company has a good and reputable credibility image. A Singapore-based private limited company can quickly obtain a fund or bank loan. As a result, investors or potential shareholders are more likely to invest money in a company.
Cons of a Registered Company in Singapore
Strict Rules and Laws
In comparison to partnerships, they are subject to stricter regulations and rules. For example, the company must adhere to the rules and procedures outlined in the Companies Act. In addition, the company accounts should contain more information than the partnership accounts, and they must have at least one company director and a company secretary.
Greater Disclosure and Administration Requirements
This is in comparison to collaborations. As a result, the company’s operating costs are higher than in a partnership. For example, they must file annual audited accounts or Directors or FRS. In addition, they must report if they are exempt from auditing and file returns with the ACRA, with penalties if they fail to do so on time. These could be made available to the public.
Setup and maintenance costs could be higher.
Numerous formalities and statutory procedures must be followed to establish or maintain a company. There are two procedures that must be followed: pre-incorporation and post-incorporation, and this requires money and can get costly at times. There are also annual filing requirements to meet.
The Liquidation Process Is Prolonged
Stopping the subsequent trade strike-off process to dissolve a private limited company is more complex and costly. The legal compliance that must be completed is complex, and the cost to approach it is also high because experts from an accounting services provider must be hired.
The more compliance obligations, the more time-consuming and costly to comply with the statutory obligations of a company. These requirements, however, will be manageable with careful time management and regular bookkeeping.
Understandably, deciding which business entity to use can take time and effort, depending on one’s business needs. However, given that most of the government’s grants and incentives are only available to businesses, this is typically the entity of choice for many entrepreneurs and foreign investors.
Before forming a private limited company in Singapore, weigh the pros and cons to determine whether you still want to do so.