Exempt Private Company in Singapore: Benefits and Formation Steps
- Published: 23 May 2025
- 12 min read
- Starting a Company
Rodney Wong
Author
Rodney helps customers in Singapore navigate their way through the details and benefits of our products and services, and to see how the application of technology to their needs could be a game changer for their business. A big believer in the power of the written word, he makes tech topics accessible, applicable, but most of all, useful, to encourage entrepreneurs to chase that big idea.
Nisah Rahim
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Nisah Rahim is our go-to expert reviewer for all things Corporate Secretary-related in Singapore. As the Corporate Secretary Team Lead and content reviewer, Nisah meticulously examines our blog posts to ensure we provide comprehensive information on Corporate Secretary services such as local regulatory compliance, managing board meetings, maintaining company records, and providing expert advice on corporate governance matters.
Imran Marican
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An Exempt Private Company (EPC) provides significant benefits for small businesses and startups in Singapore by offering high tax exemptions for private limited companies without the complexity of a broader shareholder base. This article will show you what an EPC is, its benefits, and how to set one up.
Key Takeaways
- According to the Companies Act, an Exempt Private Company (EPC) in Singapore is designed for private limited companies with up to 20 individual shareholders and offers increased financial flexibility and corporate tax exemptions.
- Key characteristics of EPCs include limitations on shareholder numbers, financial reporting flexibility, and enhanced privacy for all the members, making them a preferred structure for entrepreneurs.
- Incorporating an exempt private limited company involves choosing a unique business name, filing necessary documents, obtaining registrar approval, and adhering to compliance obligations like holding Annual General Meetings and filing annual returns.
Understanding an Exempt Private Company in Singapore
An Exempt Private Company (EPC) in Singapore is a type of exempt private limited company designed for a controlled and private business environment. An exempt private company limited by shares allows up to 20 individual shareholders while prohibiting corporate shareholders. EPCs are tailored for small businesses and startups that seek simplicity and privacy in their corporate structure, including the option of being an Exempt Private Limited Company.
The appeal of an exempt private limited company in Singapore lies in its flexibility and ease of management. An exempt private company limited by shares comes with reduced regulatory burden and favourable tax exemptions. It also offers limited liability protection, safeguarding shareholders’ assets beyond their investment in the company.
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Such characteristics make the EPC the most common and preferred business structure in Singapore, ideal for those aiming to start a business with minimal complexity.
Key Characteristics of Exempt Private Companies
Exempt private companies possess specific features that differentiate them from other business entities in Singapore. These features are designed to accommodate the needs of small businesses and startups, providing a streamlined and efficient corporate structure. The main characteristics include limitations on shareholders, financial reporting flexibility, and enhanced privacy and confidentiality.
Understanding these key characteristics is crucial for anyone considering forming an EPC. Exploring these details highlights how these features enhance the benefits and operational ease of exempt private companies.
Limited shareholders
One of the defining characteristics of an EPC is the limitation on the number of shareholders. An EPC can have a maximum of 20 individual shareholders, and at least one shareholder is required to establish the company. This ensures that the company remains private and controlled, avoiding the complexities associated with a broad shareholder base.
Anybody, including foreigners, can become a shareholder in an exempt limited company. However, corporate shareholders are strictly prohibited.
Corporate entities are not allowed to hold shares, ensuring that all shareholders are individuals in a separate legal entity. This unique structure makes the EPC a popular business structure for those seeking a controlled and transparent shareholder environment.
Financial reporting flexibility
Exempt private companies benefit significantly from financial reporting flexibility. Due to their unique shareholder structure, these companies face fewer burdens in adhering to financial reporting standards, saving them both time and resources.
Such financial freedom allows EPCs to focus on growth and development without being bogged down by stringent financial reporting requirements. This advantage is particularly beneficial for small businesses that need to allocate their resources efficiently.
Privacy and confidentiality
Privacy and confidentiality are paramount for many businesses, and EPCs excel in this area. Unlike publicly listed companies, exempt private companies in Singapore offer greater privacy for shareholders, ensuring that personal information is not disclosed to the public. This feature protects the interests of shareholders and maintains a level of confidentiality that is often sought after in the business world.
Additionally, the structure of EPCs allows them to keep financial and operational information confidential. This confidentiality is crucial for protecting business strategies and maintaining a competitive edge in the market.
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Benefits of Incorporating an Exempt Private Company
Incorporating as an Exempt Private Company comes with a multitude of benefits that are particularly appealing to a small company and startups. These benefits include limited liability, various exemptions, and simplified compliance requirements. The simplicity of the EPC structure minimises corporate complexity, making it an attractive option for those looking to start a business in Singapore.
Benefit 🏆 | Description ✍️ | Key Points 📌 |
|---|---|---|
| Tax Exemptions💸 | EPCs enjoy major tax benefits under the Start-Up Tax Exemption Scheme. | Up to S$200K exempt in first 3 years; boosts growth. |
| Limited Liability🛡️ | Shareholders’ financial risk is limited to their investment. | Personal assets are protected from company debts. |
| Simplified Compliance📋 | EPCs face fewer financial reporting and audit obligations. | No audit needed if turnover < S$10M; saves time and cost. |
| Loan flexibility🏦 | EPCs have more loan flexibility as they are exempt from the Companies Act prohibitions on how companies can extend loans. | EPCs can grant loans to other companies or serve as loan guarantees for another company owned by the same director. |
Understanding these advantages helps entrepreneurs make informed decisions about their business structure.
Tax exemptions
Exempt private companies in Singapore enjoy significant tax benefits, particularly through the Start-Up Tax Exemption Scheme. This scheme offers high exemptions for newly founded EPCs, allowing up to S$200,000 of chargeable income to be exempt for the first three years. The first S$100,000 of normal chargeable income is fully exempt from tax, while the next S$100,000 is subject to a 50% exemption for the next two subsequent financial years. A Singapore Exempt Private Company can benefit from these provisions as well, just like other Singapore companies and a Singapore citizen. Additionally, the corporate tax rate plays a crucial role in determining the overall tax liability for these companies. The exemption can be claimed on the company's annual tax returns.
The Start-Up Tax Exemption Scheme is a major draw for entrepreneurs looking to maximise their financial efficiency. These benefits can significantly reduce the financial burden on new businesses, allowing them to reinvest in their growth and development.
Limited liability
Limited liability is a cornerstone benefit of incorporating an EPC. This principle restricts the financial liability of shareholders to the amount they have invested in the company limited by shares. In practical terms, this means that shareholders’ personal assets are safeguarded from any debts incurred by the company, providing a significant layer of protection.
This protection is crucial for entrepreneurs who want to mitigate personal financial risk while pursuing business opportunities. The limited liability feature is one of the key reasons why EPCs are a preferred choice for many small businesses.
Financial Loan Freedom
The Companies Act does not allow private companies limited by shares to grant loans to other business entities related to themselves. Also, companies cannot serve as loan guarantees or provide loan security for loans obtained by other companies if the first company's director owns more than 20% of the share capital of the latter. Similarly, most Singapore companies cannot extend loans to their directors unless for specific purposes.
Exempt private limited companies are exempt from all the above requirements, allowing them to function similarly to an independent financial institution for associated or subordinate Singapore companies.
Simplified compliance requirements
Exempt private companies benefit from reduced compliance obligations, making managing their financial reporting and related requirements easier. These companies experience reduced obligations regarding financial standards, which can lead to cost savings.
A “small company” is exempt from auditing its financial statements. Singapore law requires a small company to:
- be a private company in the financial year in question.
- meet at least 2 of the 3 criteria for the immediate past two consecutive financial years: total annual revenue ≤ $10m; total assets ≤ $10m.
- have no more than 50 employees (employees ≤ 50).
The simplified compliance requirements mean small businesses can file simplified annual returns and bypass other regulations mandated for larger enterprises. This allows business owners to focus on core activities without being overwhelmed by corporate regulatory authority demands. This streamlined approach is particularly advantageous for small companies looking to optimise their operations.
Registration Process for an Exempt Private Company
To register for an Exempt Private Limited Company in Singapore, you begin by selecting a unique business name. You will then file the required documents to secure approval from the registrar. Registration for a private limited company in Singapore can be completed with the online registration tool.
Understanding the requirements and following the correct steps can ensure a smooth incorporation process. This section will guide you through the essential steps.
🔢 Step | 🛠️ Action | 📝 Details |
|---|---|---|
| 1 | Choosing a Company Name🏷️ | Pick a unique, appropriate name, avoiding duplication, vulgarity, and trademark issues. |
| 2 | Filing Necessary Documents📄 | Submit the Memorandum and Articles of Association accurately to prevent delays. |
| 3 | Obtaining Approval from the Registrar✅ | Get approval and receive your Unique Entity Number (UEN) to start operations. |
Choosing a company name
Singapore-incorporated companies must have a unique and appropriate company name. The name must not duplicate any existing names and should not contain inappropriate or vulgar words. Additionally, the name should not infringe on trademarks to avoid legal complications.
Filing necessary documents
The next step is to file all the necessary documents for registration. The essential documents required by Singapore law include the Memorandum and Articles of Association, which outline the company’s constitution and allocation of shares as required by the Companies Act. These documents must be submitted as part of the registration process.
Obtaining approval from the registrar
After submitting the necessary documents, the next step is to obtain exempt private limited company approval from the registrar. Once the documents are approved, the registrar will notify the applicant and issue the company a Unique Entity Number (UEN), which marks your official incorporation and allows your company to begin operations.
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Compliance Obligations for Exempt Private Companies
Maintaining compliance is imperative for exempt private limited companies to ensure legal operation in Singapore. Singapore law requires these companies to adhere to various filing and compliance obligations post-incorporation.
The compliance obligations for EPCs include holding Annual General Meetings (AGMs), filing annual returns, and meeting audit exemption criteria. By staying compliant, EPCs can focus on their business activities without worrying about legal issues.
Annual General Meeting (AGM)
Exempt private limited companies must hold an AGM within six months of the company’s financial year-end. However, they can pass resolutions in writing instead of holding a formal AGM. This flexibility allows companies to comply with the Companies Act legal restrictions while managing their operations efficiently, including the role of a company secretary.
The confidentiality of shareholder identities is another advantage, protecting the privacy of individuals involved in the company and company secretaries.
Filing annual returns
Exempt private limited companies must file annual returns within a month of the AGM to comply with regulatory obligations. The filing process is streamlined for EPCs, allowing them to submit simplified annual returns if they meet specific conditions. EPCs must meet additional conditions related to their financial statements to file simplified annual returns.
Account submission requirements are also less strict for EPCs. Unlike other corporate entities, exempt private limited companies are not required to file audited accounts. Instead, they can submit unaudited accounts to the registrar and ACRA. However, EPCs must file audited accounts if their annual turnover exceeds S$10 million.
Audit exemptions
Exempt private companies can benefit from audit exemptions if they meet specific criteria regarding their financial performance. A company qualifies as a “small company”. It is exempt from audit requirements if it is private and meets at least two of the following criteria for the past two financial years: annual revenue ≤ S$10 million, total assets ≤ S$10 million, or no more than 50 employees. If an EPC is not audited, it must prepare and file unaudited financial statements in compliance with Singapore Financial Reporting Standards (SFRS) and maintain records of all business transactions.
These audit exemptions can significantly reduce compliance costs and administrative burdens, making it easier for small businesses to manage their financial reporting.
Common Challenges and Solutions for Exempt Private Companies
Exempt private companies often face challenges that hinder their growth and operational efficiency. Here are some common issues:
- Limited access to funding options can be a significant hurdle.
- Seeking alternative financing solutions, such as private equity, can help alleviate this issue.
- Maintaining accurate financial records is essential.
- Utilising accounting software can streamline bookkeeping processes.
High operational costs and market competition are other common challenges. Employing cost-effective strategies, such as outsourcing non-core functions, can provide relief. Developing a unique value proposition can also help distinguish the company from competitors, ensuring a competitive edge in the market.
How Can Professional Services Assist?
Professional services are crucial in assisting exempt private companies with various aspects of their business operations. They can help EPCs navigate compliance issues and ensure adherence to Singapore’s regulatory framework.
Entrepreneurs can also leverage virtual office services at an affordable price to meet the requirement for a registered office address when forming an EPC. Using a registered virtual office address allows EPCs to comply with legal requirements while minimising operational costs.
Osome offers a wide range of services, including company incorporation, bookkeeping, and corporate secretarial assistance, helping entrepreneurs set up their businesses fully online. Ensuring compliance with all legal requirements, our experts make starting a new company simple. Contact us today!
Summary
Incorporating an Exempt Private Company in Singapore offers numerous benefits, including limited liability, tax benefits, and simplified compliance requirements. These advantages make EPCs attractive for small businesses and startups looking to establish a presence in Singapore.
Ultimately, the simplicity and flexibility of an EPC, combined with the support of professional services, can pave the way for a successful business journey. Embracing this business structure can lead to growth, efficiency, and long-term success.
Rodney helps customers in Singapore navigate their way through the details and benefits of our products and services, and to see how the application of technology to their needs could be a game changer for their business. A big believer in the power of the written word, he makes tech topics accessible, applicable, but most of all, useful, to encourage entrepreneurs to chase that big idea.
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FAQ
How to apply for an Exempt Private Company in Singapore?
To apply for an Exempt Private Company (EPC) in Singapore, you must incorporate the company through the Accounting and Corporate Regulatory Authority (ACRA) by submitting the required documents online, ensuring the company has no more than 20 shareholders and no corporate shareholders.
What is the maximum number of shareholders allowed in an Exempt Private Company in Singapore?
An Exempt Private Company in Singapore can have a maximum of 20 individual shareholders.
What are the tax benefits available to Exempt Private Companies in Singapore?
Exempt Private Companies in Singapore benefit from substantial corporate tax exemptions, particularly through the Start-Up Tax Exemption Scheme, which permits up to S$200,000 of chargeable income to be exempt for the initial three years. This provision can significantly reduce the tax burden and foster financial growth for new enterprises.
Are Exempt Private Companies required to undergo audits?
Exempt Private Companies that qualify as “small companies” are not required to audit their financial statements. To qualify, the company must be private and meet at least two of the following criteria for the past two financial years: annual turnover ≤ S$10 million, total assets ≤ S$10 million, or ≤ 50 employees. However, unaudited financial statements must still be prepared and filed in accordance with Singapore Financial Reporting Standards (SFRS).
What documents are needed to register an Exempt Private Company?
To register an Exempt Private Company, you need the Memorandum of Association and Articles of Association, which describe the company's constitution and share capital allocation.
Can an Exempt Private Company extend loans to its directors or other companies associated with it?
Yes. EPCs are exempt from the Companies Act prohibitions on how companies can grant loans and to whom. For example, EPCs can grant loans to other companies associated with them or extend loans to their directors, while regular private companies are prohibited from doing so.
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