The Limited company (Ltd.) is the most popular entity type to register in Singapore under the Singapore Companies Act.
Key Feature of a limited company:
- A limited company’s liabilities are limited by the amount of share capital and the liabilities of the owners are limited to the share capital subscribed by them.
- A limited company can be either a public or private company in Singapore.
- The shares of Private Limited (Pte. Ltd.) Company are not available to the public and the company must have less than 50 shareholders.
- In the case for a Public Limited company, they are able to offer shares to the public to raise capital and there must be at least 50 shareholders in the company.
Advantages of Limited Company in Singapore
- Distinct Legal Entity:
A limited company has its own legal identity separate from that of its owners and shareholders.
This gives them the power to acquire assets, enter into contracts, avail debts and carry on business in their own distinct name.
The legal entity will be protected and the use of the same/similar name by any other business is legally prohibited.
- Limited Liability
The liability of the owners and shareholders is limited to share capital subscribed by them. Therefore, the personal assets of the owners/shareholders are kept separate and protected.
However, it must be noted that in the case of a limited company, if a shareholder is also a director, then the liability may extend to them personally if the director’s actions or inactions have caused the liability or loss.
The legal structure of limited company perpetuates a commitment to long term business, governance and responsible business management. Therefore, contributing to the credibility of the company amongst its suppliers, customers, employees and opens/ improves its access to credit and new growth opportunities.
- Ease of Raising Capital
With a limited company structure, companies are able to have the option of raising additional capital by issuing new shares and seeking new investors.
In a limited company, the owner/owners can transfer some oh is/her equity in the company in exchange for investment or issue new shares.
- Tax benefits
The corporate tax rate of 17% is highly competitive in Singapore. A further tax exemption is available for newly set up limited liability companies, which could effectively result is only 9% tax on the chargeable income of up to SGD $ 300,000.
- Ease of Transfer of Ownership
A limited liability company can be transferred, either wholly or partially by selling off all or part of its total shares or through the issue of new shares to additional investors.
Hence if there is a dispute among the owners/shareholders, one of the shareholders may be able to exit the business by selling their shares.
This does not a require complex documentation and it will not disrupt the course of business. This can be attractive to the owners/shareholders of the company.
If you would like more information regarding the setting up a limited company in Singapore, please feel free to contact us, and one our business advisors will be pleased to guide you through the process.