All Things about Incorporating a Private Limited Company in Singapore
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Arthur Phan
Introduction
Singapore attracts worldwide entrepreneurs to incorporate companies with various supportive policies. However, businesses must choose an appropriate entity type to avail all the ideal conditions effectively.
As a popular choice of most businesses, the Private Limited Company poses various benefits relating to high confidentiality, convenient transfer, easy capital pool access, and supportive tax incentives. If you wonder whether this entity type suits your organizational structure, continue reading this article for detailed information.
Private Limited Company Definition
The Private Limited Company restricts the shareholder's number to 50 people. All issued shares are private without being available to the general public. For identifying this entity type, the corporation name must end with Pte. Ltd suffix.
The Private Limited type earns its spot as a flexible, credible, and scalable business form that distinguishes the liability between shareholders and the entity. Specifically, shareholders’ responsibilities are limited based on the contributed capital. Furthermore, this company type offers various other benefits, which we will mention in the next section.
Advantages of Opening a Private Limited Company
Distinguished Legal Entity
The Private Limited Company distinguishes the company’s identity from which of shareholders and directors. The responsibility to deal with debt, purchasing assets, signing contracts, and suing issues will come under the corporation name without involving related individuals.
Continued Corporations' Existence
Due to the ease of transferring shares and shareholders’ ownership, the company’s active status will continue regardless of the organizational structure changes. It means that fluctuating events, such as resignations and illness of shareholders, will not affect the business operation progress.
Limited Liability
This company form will keep shareholders’ liability to the extent of the contributed capital amount. Consequently, it separates them from the responsibility to deal with the company’s debts beyond their initial monetary contribution.
Convenient Capital Raising
When the shareholders' number is less than 50, the limited liability attracts new shareholders to join the company, with more money flowing into the total capital. Alternatively, the company can issue more shares for the existing ones for more capital raises.
The separated liability to the company’s assets has made the investment from new individuals easy. Additionally, Singapore banks facilitate Private Limited Companies to borrow a loan with supportive terms. By attaching the company’s assets, the local banks are confident of retrieving the loan amount.
Easily Ownership Transfer
The simple legal documentation eases the wholly or partially transferring shares’ ownership process. The transferring procedure can come under two approaches without interfering with the business operation:
- Selling all or part of the total shares to new shareholders
- Issuing more additional shares to current shareholders
Trustworthy Brand Image
As being spectated seriously by bankers, suppliers, clients, and other partnership entities, incorporating Private Limited Companies bears a more trustworthy image than the Sole Proprietorship and Partnership ones. Moreover, investors prefer distributing monetary assets to businesses with inspirational missions and visions.
Tax-incentive Benefits
The single-tier tax system of Singapore has only taken the corporate tax level into account without requiring tax on shareholders’ dividends. Additionally, government policies facilitate Private Limited Companies with an incentive tax rate according to the profits earned. For more details, it is 9% for earnings below $S 300.000 and 17% for one up to $S 300,000.
Disadvantages of Opening a Private Limited Company
Besides the practical benefits mentioned above, this company form irritates business owners with several disadvantages. One of the typical problems lies in the complicated registration process.
Specifically, you will undergo various requirements and documents for setting up, meeting legal compliances, and renewing in the entire phase, including post and after incorporation. The total costs for completing the registration process might not be pocket-friendly.
Document Requirements to Register
Incorporating a Private Limited Company in Singapore requires owners to prepare various documents:
- Company name: Businesses must have a qualified company name to legitimate the operation and build an international brand. Criteria to have a high-chance-of-approval name includes:
- Not an undesirable or deceptive name
- Not be confused or similar to other corporations’ names
- Summarized Business Activities: Indicate the industry field in that businesses majorly work according to the Standard Industrial Classification Code Work in 2010.
- Shareholder Agreements: Indicate the shareholders’ obligations and how the internal management operates to prevent unexpected disputes in the future.
Shareholding Pattern: Indicate the approach of distributing shares to relative entities in the company. - Details of Directors: Provide information about at least 1 primary director.
- Details of Shareholders: Provide information about at least 1 shareholder.
- Details of the Company Secretary: In the first 6 months after incorporation, businesses must register for a local company secretary.
- Registered Office Address: Provide information about the registered Singapore office address.
- Memorandum of Association: Indicate businesses’ activities, the relationships between companies and shareholders, and rule lists to streamline internal management.
- Business Profile: Summarize information about the company.
- Incorporation Certificate: Confirm the official company incorporation.
- Share Certificate: Confirm the shareholders' ownership of the share number as legal proof.
- Minutes of the First Board Meeting: Record discussions in the first meeting held by the directors.
- Board Resolution for Account Opening: Allow businesses to open a bank account with an assigned authorized signatory.
Criteria to Choose a Trustworthy Service Provider
You should hire a prestigious service provider to incorporate a Private Limited Company due to various complicated legal issues throughout the process. With a profound knowledge of economic laws, a third-party service can assist you with a detailed preparation phase to ensure meeting the government’s compliance.
Global Offshore Company (G.O.C) prioritizes easing our customers’ registration process with a safe procedure. Having supported various entities worldwide, we believe in being a trustworthy partner alongside your business's growth journey.
Disclaimer:
Readers are advised to consult with qualified legal, financial, and tax professionals before making any decisions based on the information provided in this blog. It is important to understand that laws, regulations, and tax implications can vary widely based on jurisdiction, residency, business type, and other factors. Therefore, seeking professional advice is essential to ensure accurate and tailored recommendations that align with your specific circumstances.
The authors, publishers, and G.O.C (Global Offshore Company) cannot be held responsible for any actions taken based on the information presented in this blog. The content is not intended to substitute for professional advice, and readers should seek the guidance of experienced professionals to address their individual needs and concerns.
