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A Beginner’s Guide to the Pros and Cons of Setting Up A Private Limited Company in Singapore

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Singapore offers endless opportunities to businessmen from all over the world when it comes to company incorporation. The city-state enables entrepreneurs to choose from various types of business structure. One most preferred business structure in Singapore is the private limited company. Private limited companies have their legal identities, separated from their directors and shareholders.

A private limited company is permitted to enter into legal contracts, own properties, and sue and be sued. It is mandated to use a suffix of Pte Ltd, Ltd, or Private Limited, as a part of the company name. Anyone beyond 18 years old can opt for this business structure. Private limited companies offer many benefits compared to other business structures, such as the sole proprietorship. However, it is not without disadvantages. Here are the advantages and disadvantages of a Singapore private limited company.

Benefits Of Setting Up a Private Limited Company In Singapore
Below are the advantages of a private limited company in the country.
Limited liability nature: All private limited companies are liable for their debts and losses during the business operations. If the company fails, the liability of the shareholder shall extend only up to their share investment. Hence, the shareholders’ assets will not be utilised in whatever means to pay for the company’s debts.

Ease of ownership transfer: A share certificate expresses a shareholder’s portion of stakes in a company. In a private limited company, transferring ownership of shares is relatively easy. The process only involves transferring the shares to the name of the new owner or shareholder.

Enhanced attractiveness to investors: Significant investors and financial institutions, such as banks, prefer to lend money to a private limited company rather than a partnership or sole proprietorship since the former company holds significant credibility. Customers also view this branding more favourably.

High growth probability: Private limited companies have the option to convert into a public company when they grow in size. This conversion helps them raise funds easily by providing their debentures and shares to the general public.

Competitive tax rates: Private limited companies are tax-efficient entities. They enjoy various tax rebates, incentives, and schemes in the country. For instance, corporate tax in Singapore is low and ranges from zero to seventeen per cent, while the GST is capped at seven per cent. Moreover, they are not taxed on capital gains.

Start-up support: Singapore government introduces many schemes aimed to support local start-ups. The new start-ups’ tax exemption scheme allows new local companies to get up to seventy-five per cent tax exemption on their first SGD 100,000 of normal chargeable revenue and up to fifty per cent tax exemption on their next SGD 100,000 of normal chargeable revenue.

Disadvantages Of a Singapore Private Limited Company
The following are the disadvantages of a private limited company:
Stringent regulations: Registering a private limited company in Singapore involves abiding by the Companies Act’s strict rules and regulations. These regulations are more stringent than the law for incorporating a sole proprietorship or partnership. Statutory compliance, such as accounting, for private limited companies also have more information compared to others.

Greater administrative efforts: Operating a private limited company needs persistent administrative efforts, requiring high operational expenses, and qualified personnel. The cost of starting and running this type of company is also higher compared to the sole proprietorship or partnership.

A complicated and lengthy process of liquidation: Ceasing the trade and the resulting strike-off process to dissolve private limited company is harder and more expensive. The liquidation process also requires more intricate and costly legal compliance.

Getting Help From Company Incorporation Services Provider In Singapore
Business owners intending to set up a private limited company can get assistance from a professional company incorporation services agency to streamline the process of company incorporation in Singapore and make sure they start their company on the right track. Some service providers also offer other helpful business solutions, such as business advisory, accounting, and corporate secretary services.