Setting Up a Private Limited Company (Pte Ltd) in Singapore

A Singapore Private Limited Company (Pte Ltd), one of the most popular business entities, is recognised for its dynamic, credible, and scalable nature, making it a well-suited structure for prospective business owners. This company incorporation results in a separate legal entity, also known as a private company, which distinguishes itself from its shareholders and is viewed as a taxable entity in its own capacity. This means that the shareholders of such a limited liability company are not held personally accountable for its debts and losses beyond their investment in paid-up share capital.

Key characteristics

As a separate legal entity, a Singapore Private Limited Company can enter into contracts, employ personnel, and hold assets under its own distinct legal identity. Once incorporated, the company receives a company business profile (which includes the company name and registration number) and a Unique Entity Number (UEN). Shareholders in a Pte Ltd enjoy liability protection, which safeguards their personal assets from business debts and liabilities. Shareholders are liable only to the extent of their capital investment.

Comparison with other business structures

While a Private Limited Company stands as a separate legal entity, offering shareholders liability protection, a partnership does not afford the same luxury. Partners in a partnership may be personally liable for the business's debts and obligations. Also, while partners possess and directly manage the business in a partnership, shareholders in a Pte Ltd own the company but may not necessarily manage it.

In the realm of taxation:

• Sole proprietors are subject to personal income tax on their business profits
• Pte Ltds are taxed at a corporate tax rate of 17%
• Partnerships don’t incur separate taxation. Partners are instead taxed individually on their share of the profits.

A Singapore Private Limited Company can benefit from its separate legal entity status, which allows it to raise capital by selling shares. This capability is not available to sole proprietorships.

Incorporating a Private Limited Company offers significant benefits for ambitious entrepreneurs. A key advantage is liability protection, ensuring shareholders are not personally accountable for the company's debts beyond their investment. This safeguards personal assets from company liabilities.

Additionally, Private Limited Companies in Singapore enjoy tax incentives, including reduced corporate tax rates and exemptions, particularly advantageous for startups and SMEs.

Raising capital is also easier for Private Limited Companies, as they can issue new shares to existing or new shareholders within 2 to 3 working days, facilitating business expansion.

Tax incentives

The tax benefits available to Pte Ltds make it a popular business structure in Singapore. The corporate tax rate for Private Limited Companies is set at 17% by the Inland Revenue Authority of Singapore. New start-ups can enjoy a 75% tax exemption on the first S$100,000 of chargeable income for their first three years.This allows new businesses to retain more profits for growth and expansion. Additionally, Singapore's single-tier taxation regime means incomes taxed at the corporate level are not taxed again at the shareholder level, resulting in tax-free income for company directors, shareholders, and proprietors, with no capital gains tax.

The various tax exemptions and tax benefits available to Pte Ltds are possibly the biggest reasons why it is such a popular business structure, specifically in Singapore.

Limited liability protection

Shareholders in a Singapore company can benefit from this protection, which means that they are not held personally responsible for the company's debts and losses beyond the amount they invested in share capital. This also means that their personal assets are protected from any liabilities that the company may incur. In contrast, a private company owned by a sole proprietor or two or more partners rely on private assets to raise capital and often pays more to secure debt capital. The liability of shareholders, compared to a sole proprietor, is limited only to the amount of their share capital, whether it has been fully paid, partially paid, or not paid at all. Individual shareholders and owners have distinct personal assets that are protected. This protection helps maintain separate financial identities for individuals and businesses.

Registering a Private Limited Company in this booming economic region is a straightforward process for aspiring company directors and hassle-free if you partner with a reputable corporate services provider. It necessitates specific documentation, including detailed information about specific business activities and paid-up capital, to ensure compliance and adherence to the requirements stipulated by the Accounting and Corporate Regulatory Authority (ACRA), but this is what your chosen provider for company registration assists you with. Non-residents must enlist the incorporation services of a registered filing agent, such as a corporate secretarial company(like Osome!), law firm, or accounting firm, to submit the application of the Singapore Pte Ltd to ACRA via BizFile+ on their behalf.

To register a Private Limited Company in Singapore, the minimum paid-up capital required is S$1. This nominal amount is sufficient for registration purposes.

Following the successful Private Limited Company registration, there are several post-registration compliance requirements to meet. These include:

1. Organising an Annual General Meeting (AGM) within six months of the fiscal year-end.
2. Filing an Annual Return within 30 days following the AGM.
3. Completing financial statements submission within seven months of the fiscal year-end.

Additionally, you will need to:

1. Open a corporate bank account for your business entity.
2. Ensure that the registered office address is a physical location where the company receives official correspondence. Note that a P.O. Box is not acceptable.
3. In certain circumstances, residential addresses may be used.
4. Ensure up-to-date information on your company business profile.
5. Provide company secretary details, including the name and contact information of the appointed company secretary, who will be responsible for ensuring compliance with statutory obligations.

Annual General Meetings (AGMs) and Annual Returns (ARs)

The annual compliance obligations for Private Limited Companies in Singapore include holding annual general meetings and filing annual returns. Following Private Limited Company registration, business owners in Singapore must conduct their Annual General Meeting (AGM) within four months following the end of their financial year.

Neglecting to comply with the AGM requirements may lead to legal prosecution, potential disqualification or debarment from directorship, and imposition of composition fines by ACRA. In the event of conviction, directors may face fines of up to a maximum of $5,000 per charge.

Corporate bank account

As a distinct legal entity, a Pte Ltd in Singapore must possess a corporate bank account to conduct business transactions. Singapore provides a range of banking options for corporate bank accounts, encompassing traditional banks like DBS, UOB, and OCBC, as well as digital banks and neobanks, such as Aspire. Here at Osome, we are proud partners with multiple mainstream and digital banks in Singapore — we can help choose the best account for your business's needs.

To establish a corporate bank account, you need to provide the following documents:

• Certified True Copies of the Company’s Constitution
• Passport (or Singapore IC) and Residential Address Proof of the Directors, Signatories, and Ultimate Beneficiary Owners
• Board resolution indicating the appointment of signatories

Effective management and careful planning are required to run a Private Limited Company in Singapore. Financial management is crucial to the success of your company. This includes:

• Enhancing the invoicing process
• Engaging in negotiations with vendors
• Closely monitoring expenses
• Adjusting prices as needed
• Closely monitoring financial performance
• Utilising accounting software
• Appointing a local company secretary to manage compliance obligations

Ensuring legal compliance is another vital aspect of managing this corporate entity in Singapore. This includes:

• Maintenance of accurate corporate registries
• Organisation of an AGM within six months of the fiscal year-end
• Filing of an Annual Return within 30 days following the AGM
• Completion of financial statements submission within seven months of the fiscal year-end