A limited Liability Company or better known as LLC, is one of the most sought-after types of entities in Singapore. Most foreign investors will choose to set up a Private Limited Company (Pte Ltd) in Singapore.
There are three types of companies that are deemed limited liability companies.
|Characteristic||Private Limited Company (Pte Ltd)||Public Company Limited by Shares (Ltd)||Public Company Limited by Guarantee (A non-profit organization)|
|Number of Shareholders||50 members maximum||Minimum 50 members with no maximum restriction||Do not have any shareholders but have a guarantor|
|Ownership rights||Can be owned by individuals and corporations||Can be owned by individuals and corporations||Membership is open for local and foreign individuals or corporate entities|
|Availability of Share Capital||Has a share capital||Has a share capital that can be listed on the stock exchange for the general public to buy||No share capital but the guarantor must guarantee the company as low as SGD 1.00|
WHY LLC COMPANY IS A POPULAR CHOICE IN SINGAPORE?
ADVANTAGES OF A LLC IN SINGAPORE
There are multiple benefits for business owners that opt to set up a limited liability company in Singapore. Benefits include but are not limited to the following:
1. Protection From The Company’s Debt And Liability
One of the main reasons why a lot of business owners choose to register as an LLC company is due to its protection of the member’s assets. This protection occurs because the shareholders are not liable for the company’s debts in the case of any financial situation that the company face. Notably, the maximum amount for which the shareholders are liable is limited only to the share capital owned by the shareholders.
This greatly reduces the risk of the shareholder’s assets being taken away by the creditor to pay the company’s debt.
2 Investment Opportunities
If your business is a public company limited by shares (not a public company limited by guarantees), you can raise the company’s capital by selling the shares to the general public to invest in the company. In addition, venture capitalists and investors prefer to invest in a limited liability company as it is governed by the Singapore companies act.
3. Ease Of Transferring Ownership Rights
It is simple to transfer ownership rights from one person to another. The transfer of ownership may be completed swiftly and conveniently through the sale of stock without disrupting business operations.
4. Various Tax Incentives
Singapore offers a lot of great tax structures for a private limited company. The tax rate follows a single-tier tax policy. Single-tier tax policy means that the dividends distributed to the shareholders are tax-free once the income tax has been calculated and paid at the corporate level. You can refer to corporate tax in Singapore for additional information on tax incentives.
5. Enhanced Image And Reputation
Setting up LLC as a business entity can significantly improve the company’s image in the public eye. This is because LLC has a specific structure, such as directors, company secretaries, and shareholders, that proposes a professional front.
6. Separate Legal Identity
LLC has a separate legal identity from its shareholders. This implies that the company holds its name without impacting the shareholders. Therefore, the shareholders and directors will not be held responsible if the firm is subjected to legal action. The company’s name will be the one that holds the responsibility for any legal charges or fines made to the company.
7. Stable Company’s Structure and Operation
LLC offers excellent stability for the company’s structure and operation. This is because the corporation’s organizational structure is unaffected by a member’s cessation, retirement, or departure for any other cause. Ownership can change without interruption to the business operation.
DISADVANTAGES OF A LLC IN SINGAPORE
It is undeniable that setting up an LLC does impose some risk on the business owner. The disadvantages are as follows:
1. Annual Compliance Requirements
Before opting for an LLC registration for your business entity, it is crucial to understand that LLCs must meet the annual compliance requirements. For example, you must submit annual reports to ACRA, file yearly tax returns to IRAS, conduct AGM (Annual General Meetings), and keep financial records and other relevant paperwork. Certain limited liability companies must also prepare audited financial statements.
Appointing a local company secretary within 6 months of incorporation is also mandatory.
2. Non-compliance Penalties
Failure to comply with the above requirements might lead to many non-compliance penalties. For instance, failure to timely update the company’s information, such as the change of the company’s directors, can result in a fine by the authorities.
If you are considering setting up a private limited company in Singapore, you can contact Relin Consultants by emailing our team at firstname.lastname@example.org.
HOW TO SET UP A LLC IN SINGAPORE?
The procedures to set up an LLC in Singapore are quite simple as long as you manage to fulfill all the required documentation and requirements.
STEP 1: DETERMINE THE CORPORATE STRUCTURE
All Singapore Private Limited companies must meet the following minimum requirements.
- Company Name – The company’s name must not be the same as other companies.
- Directors – Must have at least one resident director who is at least 18 years old.
- Number of Shareholders – the number of shareholders for the company must follow the regulation set out by the companies act and adhere to the amount for each type of company set up. There must be at least one shareholder, who may be a natural person or a foreign or local business.
- Registered office address – the address for the company’s physical office must be registered
- Secretary of the company – one certified company secretary must be appointed to carry out the formal matters and affairs of the company.
- Paid-up capital of the company – The company will require at least S$1 as paid-up capital from the investor for the initial capital of the business.
STEP 2: PREPARE THE OBLIGATORY DOCUMENTATIONS
The applicant must prepare all the mandatory paperwork. The list of the required documentation is as below.
- A record containing the firm name as it appears in the ACRA.
- Activities that the applicant engages in for business.
- Address and location of the business’s registered office.
- Information about the company’s directors and shareholders.
- Information on the business’s appointment of its company secretary.
- Details from the passport and proof of address are needed if the applicant is from another nation. The foreign applicant must provide information on the registered agent or Singapore Director.
- Details on the articles of association and memorandum of association must be submitted.
- Singapore residents must submit a copy of the resident card or proof of residency.
STEP 3: SUBMISSION OF APPLICATION TO ACRA
Obtaining ACRA approval for the name is the first step in the process. The submission of the company’s name can be made online. The name of the company can be reserved for 120 days if the ACRA approves it. Do note that foreigners wishing to set up a company in Singapore must engage a professional firm such as Relin Consultants.
Thereafter, the company can apply for incorporation along with the relevant required documents in the portal.
The ACRA will examine the application. After everything is done, the applicant will be informed of the results. The applicant would receive an online notification if the firm was registered successfully. The business registration number and the certificate of incorporation will be granted to the applicant electronically. Notably, S$300 incorporation fees and S$15 for the name application must be paid.
Registering a Private Limited company in Singapore offers more pros than cons. If you are unsure which structure best benefits your business, we advise you to seek a non-obligatory consultation before deciding to set up the LLC in Singapore to avoid any mishap that can affect the business operations later on.