Thinking of starting a private limited company in Singapore? It is possible when you know how. Starting a private limited company in Singapore requires a certain amount of understanding of how Singapore system works. A private limited company in Singapore has many advantages and many entrepreneurs would prefer to start one if they fulfill the stringent requirements.
What is a Private Limited Company?
A private limited company is an entity where it has up to 50 shareholders. As it is a “limited”, it means that it has limited liabilities when conducting businesses legally. This is the most common business setup in Singapore and it has a suffix of “Pte Ltd”. As a private limited, there must be at least one shareholder who can be a person or another business entity. As it is a entity, it can own properties, sue and be sued in the event of disputes and the owner is usually not involved.
What are the minimum requirements for setting up a private limited company in Singapore?
Following are the few requirements which must be met in order to get the company registered with the authority.
- At least one local director who is a resident in Singapore. He/ she can be a Singapore citizen, Permanent Resident (PR) or bearer of Employment Pass or Entrepreneur Pass (EntrePass).
- The number of the shareholders is at least 1, and up to 50. There is no mandatory requirement for the shareholder to be resident in Singapore. 100% foreign shareholding is allowed.
- The company must have a local register office addres and PO box is not allowed.
- The minimum paid up capital required is S$1.00. However, EntrePass holder will need to have a minimum paid up capital of S$50,000.
- The company must appoint a company secretary within 6 months of incorporation. The secretary must be a real person residing in Singapore, and the person can be a staff or the company or an appointed services.
Process of Registering Private Limited Company
The process of registration of a private limited company has been done undertaking two easy steps:
- Company Name Reservation
- Company Registration (Filing of Application Form & necessary documents)
The above steps can be done online at BizFile, allowing you to be free from paperwork and it’s fast.
What are the Advantages of Private Limited Company Singapore?
Limited Liability: As a private limited, it means that the liabilities are limited for the shareholders. In this business entity, the company is viewed as a completely different, independent legal entity. In layman terms, the company is considered as a “person” doing business. As such, the company is liable for any loss or debt incurred by the business and the shareholders are limited to just the amount they have invested.
Legal Identity: Since a private limited company is a distinct legal identity, the company can enter into legal agreements, own properties, sue or be sued. A Singapore private limited company has proper and continuous succession. That means if a director or the owner dies or unable to conduct the business, the company will still be in operation.
Taxation Advantages: Singapore would usually prefer a private limited setup and so they have implemented a number of tax benefits and incentives. One biggest advantage is called the full tax exemption scheme, where a new private limited company can enjoy ZERO tax rate in the first 3 years of incorporation on it’s first S$100,000 annual revenue. The effective corporate tax rate for all companies of profit up to S$300,000 is 8.5% and capped at 17% for companies with annual revenue above S$300,000. On top of that, the company follows a one-tier tax system where dividend earned by the shareholder are not taxable.
Transfer of Ownership: The ownership of the company can be easily transferred in whole or in part and the business is not disrupted at all. The process is mainly done by selling part or all the shares to the new shareholders.
Lastly, it is important to know that businesses in general hold a higher regard to private limited companies. It creates a certain trust and stature in the investors, customers and others. While some businesses started as a sole proprietor or partnership, they tend to move to private limited when they have bigger business potential.