It is very common for aspiring business owners to incorporate a Pte Ltd company for their maiden foray into the business world. Unfortunately we have seen many cases of people who set up Pte Ltd companies without really understanding how they would actually benefit from using a Pte Ltd company. Therefore, it is certainly worthwhile to step back to consider whether is this the right and only business vehicle for you.
Apart from limited liability that it offers to its shareholders, a Singapore Pte Ltd company is beneficial in terms of enhanced tax exemption on the first $100,000 of chargeable income for the first three years after incorporation.
There are certain industries in Singapore and elsewhere which may require only a Pte Ltd company to be able to conduct business. Furthermore, a Pte Ltd entity is also easier to raise funds through bank borrowings, private investors or government grants. Third parties also have more confidence in a business which operates as a Pte Ltd company and therefore operating as a one might be beneficial simply for sales and marketing purposes.
However, on the other side of the coin, the important question that you may want to ask yourself is am I prepared to handle the compliance requirements that comes with the benefit of a Pte Ltd company?
With the benefit of limited liability, the Companies Act requires a Pte Ltd company and their directors to be subjected to more regulation. A Pte Ltd company need to prepare financial statements each year which are compliant with Singapore’s accounting standards. The financial statements are then used to prepare the AGM minutes and filing the Annual Return with ACRA. The last annual filing obligation is to file the company’s income tax return to IRAS, which is due every mid December. Heavy penalties and fines will be imposed by the authorities if a Pte Ltd company fails to submit these on time.
It is also important to know that the Pte Ltd company is a separate legal entity to the shareholders/ directors and that they can’t draw company funds for their personal use unless it is specifically classified as salaries, loan or expenses reimbursements. All this need to be accounted for accordingly as this have legal and tax implications. It is also essential to make sure all record keeping are in good order for accounting, secretarial and tax purposes.
Our firm are registered professional filers with ACRA and we help clients to incorporate their new company. Drop us an email today if you require our assistance in incorporating your new company.