The most relevant question you need to decide when setting up a company is which legal form to choose for your company, as it can have a significant impact on your personal risk in the business and the prospects of your business returning financial returns.
Before deciding on a business form, you want to consider important issues such as ease of formation, asset and liability, commercial asset appreciation and tax liability. Although you will definitely seek legal advice from your lawyer, it is recommended that you understand the basics of all legal forms before meeting with a lawyer.
In Singapore, companies are primarily operating companies, sole proprietorships and partnerships.
Companies must be registered under the Singapore Companies Act and registered separately by their members. Although you can set up an unlimited liability company, almost all companies in Singapore are limited liability companies because of its superiority to other forms of company.
Limited Liability Company (LLC) is a relatively new form of business organization. The main feature of a limited liability company is that the owner's liability is limited to the company's assets and its personal assets are not affected by commercial debt.
Singapore's limited liability company can be of the following types:
The technical terminology of Singapore Private Limited is a share private limited company. The name of a private limited company in Singapore usually ends with Private Limited or Pte Ltd.
Private limited companies have various advantages over the other two traditional business types, making it the most flexible and popular type of business entity in Singapore. Private limited companies have their own legal personality and are separated from shareholders and their directors. It can acquire assets, debt, sign contracts, sue or be sued. In a limited liability company, members are not personally liable for the company's debt or other obligations. The ease of transfer of shares or changes in shareholders ensures that the company continues to be independent of the continuing membership of its members.
You can raise funds for expansion or other purposes by introducing new shareholders or issuing more shares to existing shareholders, and you can also benefit from the trustworthy image that your exclusive ownership or partnership has. In addition, the company's ownership can be transferred in whole or in part without disrupting operations or requiring complex legal documents. Most importantly, you can benefit from tax benefits because the company's effective Singapore income tax rate is less than 9% for a profit of up to S$300,000, and 18% for a profit above S$300,000. In addition, there is no capital gains tax.
However, LLC also has some drawbacks. Consolidation and maintenance are more complex and you need to comply with certain compliance requirements. In addition, the closure of the company is relatively more complicated.
After a private company reaches a certain level of growth and becomes a mature medium and large enterprise, shareholders may decide to list the company. The name of a listed company in Singapore ends with Limited or Ltd.
Listed companies are subject to more stringent rules and regulations because they have the right to raise funds from the public.
In a sole proprietorship, a business can only be owned by one person, and the owner owns all the assets and liabilities of the business. It is the simplest form of business entity; it is also a relatively more economical, easier to start and terminate a wholly owned company. You have complete control over all business matters, including decision making, and you can benefit from all the revenue generated by your business without having to share profits with others. You also do not need to submit a return request every year, just update your membership every year.
However, the disadvantages of sole proprietorships are far greater than their advantages. A sole proprietorship is not a separate merger entity, so you and your business are the same legal entity. As a sole proprietor, you and your business are treated as a single entity that pays income tax, and your business income will be taxed. In addition, as a sole proprietor of the business, you have unlimited liability, which means that if your business is unable to pay all the debt, your creditor who owes your business can trace your personal assets. Many entrepreneurs are often unaware of this huge financial risk.
For more details, visit A1corp.com.sg for Company registration
