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Pros and Cons of Incorporating a Private Limited Company

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Pros-and-ConsYou can incorporate a private limited company in Singapore with ease. It is as per the Singapore Companies Act, Chapter 50. You need to register it with the Accounting and Corporate Regulatory Authority (ACRA), the Company Registrar of Singapore.

A private limited company also called as Pte Ltd, is a dynamic and scalable business structure. Unlike other types of businesses that you can register in Singapore, like a sole-proprietorship or partnership, Pte Ltd has a separate legal identity from its owners or shareholders.

A private limited company can sue or be sued under its own name in Singapore. It means, if any legal issue arises during its business activities, you stay out of it.

 

Who can Form a Company in Singapore

Anyone over 18 years of age can register a company in Singapore. However, only Singapore citizens, or permanent residents, or EntrePass holders can be its resident local directors. The director cannot have a history of undischarged bankruptcy, felony, or any other kinds of charges related to dishonesty against him.

For every aspect, there is a good and the bad side of it; similar is the case with the incorporation of a private limited company. Read through the pointers given below, before appointing a provider of accounting services Singapore to incorporate your company.

 

Advantages of a PTE LTD in Singapore

  • Limited Liability Nature

Every private limited company is liable for its losses and debts accrued during its business activities. If by any chance a company fails, the shareholder’s liability extends only up to their investment in its shares. It means their personal assets are not used to pay the debts of their Pte Ltd.

  • Ease of Transfer of Ownership

The share certificates describe the portion of stakes a shareholder has in a company. Transferring ownership of shares is a cakewalk. It is done just by transferring the shares to the new owner’s name.

  • Increased Attractiveness to Investors

Big investors and financial institutes like banks prefer to lend money to private limited companies than to the sole proprietorships or partnerships. They view credibility in such a company. The customers also get attracted by their branding.

  • High Growth Prospects

When a Pte Ltd company grows in size, it has the option of being converted to a public company. By doing so, it can easily raise funds by offering its shares and debentures to the general public.

  • Competitive Tax Rates

A private limited company is a tax-efficient entity. In Singapore, it enjoys many tax rebates, schemes, and incentives.

  • Singapore corporate tax ranges from 0%-17%.
  • GST is pegged at 7%.
  • There is no tax on capital gains- dividends to investors are tax-free.
  • There is no Wealth Tax on inheritance.
  • Startup Tax Exemption Scheme

Singapore government supports local startups. Under the tax exemption scheme for the new startups, the new local businesses get:

  • 75% tax exemption on their first $100,000 of normal chargeable income
  • 50% tax exemption on their next $100,000 of normal chargeable income

 

Disadvantages of Singapore PTE LTD

  • Strict Rules

Incorporating a private limited company involves following stringent rules and regulations of the Companies Act. These are stricter as compared to the rules for registering a sole proprietorship or partnership. Even statutory compliance, like accounting for a private limited company must have more information than that of others.

  • Greater Administrative Burden

The running of a private limited company requires consistent administrative efforts. It requires qualified employees and high operational costs. Even the cost of setting up and running a private limited company is higher than the sole proprietorship or partnership.

  • Lengthy Liquidation Process

Ceasing of trade and the consequent strike-off process to dissolve a private limited company is more difficult and costly. The legal compliances involved are intricate the and cost of the process is also high as it needs the hiring of experts from a provider of accounting services.

Before incorporating a private limited company, you would like to weigh-in its pros and cons properly. It may take time for you to arrive at a decision. However, note that many business owners plan for the long term and choose to incorporate a private limited company in Singapore.

If you are you looking for a registered filing agent in Singapore to incorporate a private limited company, try us on +65-6536 0036 or kindly mail us at info@accountingservice.com.sg to discuss your needs.