Incorporation of Company

PRIVATE LIMITED COMPANY

Private Limited Company is the most popular business entity in Singapore. Unlike business entities such as a Sole Proprietorship and Partnership, it has a separate legal status from its shareholders and directors who have limited liabilities for the debts and losses of the company. It has the rights to own properties. It usually has the words ‘Pte Ltd’ or ‘Ltd’ as part of its name. In many European countries or the US, it is commonly known as a corporation.

Features of a Private Limited Company
  • A legal entity separate and distinct from its shareholders and directors
  • It can sue or be sued in its own name
  • A minimum of 1 and a maximum of 50 shareholders
  • A subsidiary company, with at least one individual shareholder with minimum of 10 percent shareholding, is entitled to local tax and development incentives
  • Partners have limited liability
  • It can own property
  • A newly startup Private Limited Company is eligible for local tax exemptions and incentives
  1. 1
    Advantages
    • Shareholders not personally liable for debts and losses of company
    • Profits taxed at corporate tax rates
    • Newly incorporated companies are entitled to tax incentives and exemptions
    • The company, as a separate legal entity, does not cease to exist if one or more of its shareholders die
    • A company’s life is usually perpetual
    • Ownership of a company can be transferred and additional shareholders can be appointed
  2. 2
    Disadvantages
    • It is governed by rules and regulations stipulated in the Singapore Companies Act. Violation of rules and regulation will result in penalties.
    • Annual returns filing and Directors’ Report are required; must have at least one director and one company secretary.
    • Greater disclosure and administration requirements, and therefore operation costs are generally higher.
    • Directors must disclose to the company information about their interests in the company’s shares, contracts and debentures.

     

What you need to know before Incorporation

Company Name: The company name must be approved by ACRA before the Singapore Company can be incorporated. ACRA will reject a proposed company name for the purpose of incorporation if:

    1. It is identical to another existing Company Name
    2. It is undesirable
    3. Names or trademark which are similar to established names such as Coca Cola and Temasek

Shareholders: A minimum of at least one corporate or individual shareholding is required. A director and shareholder can be the same or different person. 100% local or foreign shareholding is allowed. Singapore Companies Act allows a minimum of one and a maximum of 50 shareholders for a Singapore Private Limited Company. Details of shareholders will appear on public records.
Resident Directors: Singapore Private Limited Company must have at least one director who must be an “ordinarily” resident in Singapore, which means a Singapore citizen, a Singapore permanent resident or a person who holds an Employment Pass/Entrepass or a Dependants’ Pass with a residential address in Singapore.
There is no limit on the number of additional local or foreign directors a Singapore Private Limited Company can appoint. The director must be at least 18 years of age, and must not be bankrupt or convicted for any criminal malpractice in the past. Information of the directors will appear on public records. Directors can also be shareholders or vice versa.
Company Secretary: The company secretary must be a natural person who is an “ordinarily” resident in Singapore. Singapore Companies Act requires companies to each appoint a company secretary within six month of incorporation.
Share Capital/Paid-up Capital: The minimum paid-up capital for registration of a Singapore company is S$1 or its equivalent in any currencies. The minimum issued capital is one share of par value. “Bearer” shares or “No par value” shares are not permitted.The Share or paid-up capital can be increased anytime after incorporation of the company.
Registered Address: Every company registered in Singapore is required to have a registered office address. The registered address must be a physical address and cannot be a PO Box. Use of residential address is allowed for certain types of business.
Opening of a Corporate Bank Account
Once the company has been incorporated, you may open a corporate bank account with any of the local or international banks based in Singapore, and in some cases, overseas.
If you are unable to come to Singapore, you may choose a bank that allows opening of a corporate bank account without your presence. Standard Chartered Bank and HSBC are two of the international banks that allow you to open a bank account without you coming to Singapore.

Post Incorporation – What you need to know

Licenses and Permits: Some business activities in Singapore are subject to regulation by government authorities. Even if your business firm has been registered you cannot begin operation unless you have the necessary approval or license from the relevant government authorities.

Private schools, video companies, travel agencies, liquor distributors, moneylenders, banks, Financial advisers, childcare centres and importers, wholesales and retailers of liquor licenses are some examples of business that need permits to operate. For more details, refer to Singapore Corporate Tax.

Registered Office Hours: You must have a registered office address and the office must be open to public for minimum of three hours per day during normal business hours on weekdays.

Registration Number: Business registration number issued by ACRA must be on all letterheads, invoices, billings or other documents used for official business communications.

Custom Registration: If your business activities involve import, export and transhipment in and out of Singapore, you will need to register your company with the Singapore Customs and obtain a CR Number or commonly known as Custom Registration. The central registration number is mandatory for Singapore companies or organizations engaged in trading activities.

Singapore Goods and Services Tax Registration: Goods and Services Tax (GST) is a tax on the supply of goods and services in Singapore and on the import of goods into Singapore. Goods exported from Singapore and international services provided from Singapore are exempt from GST. The current rate is 7%.

All Singapore business must register for GST if their annual taxable revenue is more than S$1 million, or currently making taxable supplies and the annual taxable revenue is expected to be more than S$1 million. The business is expected to register for GST within thirty days from the time it is deemed liable.

You may also choose to register for GST voluntarily. Approval for voluntary registration is at the discretion of the Comptroller in IRAS. Once approval is given, you must remain registered for at least two years.

Registration of Singapore Central Provident (CPF): The Central Provident Fund or CPF is a compulsory pension fund scheme in which the employer and employee contribute a percentage of the monthly salary to the fund. CPF contribution by the employer is mandatory for all local employees who are Singapore citizens or permanent residents earning more than S$50 a month. The maximum CPF contribution rate for employer and employee is 14.5% and 20% respectively and can be lower depending on certain factors such as employee age, permanent resident status, etc. CPF contribution for foreign

Ongoing Singapore Company Statutory Compliance Considerations

Once your Singapore Company is incorporated, you must comply with the statutory requirements set by Accounting and Corporate Regulatory Authority (ACRA) and Inland Revenue Authority of Singapore (IRAS). For more details, refer to Compliance Matters

Tax on Singapore Private Limited Company

Singapore Private Limited Company is considered a tax resident; it is therefore eligible for tax exemptions. New startup companies pay Zero tax on the first S$100,000 of chargeable income for the first three consecutive years. A further 50% exemption is given on the next S$200,000 of the chargeable income.

Summary of Setup Requirements for Singapore Private Limited Company

  1. Minimum 1 Shareholder + 1 Resident Director + 1 Company Secretary
  2. Minimum initial paid-up capital is S$1
  3. A Singapore registered office address
  4. For applicant who are applying for Entrepass, a minimum of S$50,000 paid up is required.

LIMITED LIABILITY PARTNERSHIP

A Limited Liability Partnership (LLP) is a perfect blend of a Partnership with Private Limited Company setup. A LLP gives owners the flexibility of operating as a Partnership while having a separate legal identity like a Private Limited Company. This type is highly suitable for individuals engaged in professional services such as lawyers, architects, accountants and management consultants. Singapore citizens, residents, and employment pass holders can register a LLP. Foreign individuals and companies may also register a LLP but must appoint a local manager.

Features of a LLP
  • It has a separate legal entity
  • Partners have limited liability
  • Minimum of 2 partners, no maximum limit
  • Partners can be individuals or body corporate (company or other LLP)
  • Can sue or be sued in its own name
  • Can own property
  1. 1
    Advantages
    • It is a body corporate and has legal personality separate from its partners
    • It has perpetual succession. Any change in the partners of a LLP does not affect its existence, rights or liabilities
    • Compliance requirements are simpler as compared to private limited company
    • No annual returns filing required of LLPs, except for income tax
    • Partners not personally liable for debts and losses of LLP incurred by other partners

     

  2. 2
    Disadvantages
    • Profits taxed at partners’ personal income tax rates, therefore, not eligible for tax incentives or exemptions
    • The partners of LLPs own the assets of the business personally, and therefore personally liable for debts and losses resulting from their own careless actions

What you need to know before registration

Business Name: The business name must be approved by ACRA before the LLP can be registered. ACRA will reject a proposed business name for the purpose of registration if:

  1. It is identical to another existing business name
  2. It is undesirable
  3. Names or trademark which are similar to established names such as Coca Cola and Temasek

Partners: A minimum of at least two partners are required. The partners will not be held accountable for any debts and losses of the LLP; however, each partner will be responsible for individual wrongful act or omission.
Managers: Singapore Limited Liability Partnership must have at least one manager who must be an “ordinarily” resident in Singapore, which means a Singapore citizen, a Singapore permanent resident; a person who holds an Employment Pass, Entrepass or a Dependants” Pass.

There is no limit on the number of additional mangers a Singapore Limited Liability Partnership can appoint. The manager must be at least 18 years of age, and must not be bankrupt or convicted for any criminal malpractice in the past. Managers can also be partners or vice versa.

Registered Address: Every business registered in Singapore is required to have a registered office address. The registered address must be a physical address and cannot be a PO Box. Use of residential address is allowed for certain types of business.

Partnership Agreement: A partnership agreement, though not mandatory, is highly encouraged so as to help you protect your business in the event of a dispute. It also allows the partners to structure the roles and responsibilities that best suits your business as well as rules governing the internal management of the partnership.

Once the LLP has been registered, you may open a corporate bank account with any of the local or international banks based in Singapore, and in some cases, overseas.

If you are unable to come to Singapore, you may choose a bank that allows opening of a corporate bank account without your presence. Standard Chartered Bank and HSBC are two of the international banks that allow you to open a bank account without you having to come to Singapore.

Post Incorporation – What you need to know

Licenses and Permits: Some business activities in Singapore are subject to regulation by government authorities. Even if your business firm has been registered you cannot begin operation unless you have the necessary approval or license from the relevant government authorities.

Private schools, video companies, travel agencies, liquor distributors, moneylenders, banks, Financial advisers, childcare centres and importers, wholesales and retailers of liquor licenses are some examples of business that need permits to operate. For more details, refer to Singapore Corporate Tax.

Registered Office Hours: You must have a registered office address and the office must be open to public for minimum of three hours per day during normal business hours on weekdays.

Registration Number: Business registration number issued by ACRA must be on all letterheads, invoices, billings or other documents used for official business communications.

Custom Registration: If your business activities involve import, export and transshipment in and out of Singapore, you will need to register your company with the Singapore Customs and obtain a CR Number or commonly known as Custom Registration. The central registration number is mandatory for Singapore companies or organizations casinos in australia engaged in trading activities.

Singapore Goods and Services Tax Registration: Goods and Services Tax (GST) is a tax on the supply of goods and services in Singapore and on the import of goods into Singapore. Goods exported from Singapore and international services provided from Singapore are exempt from GST. The current rate is 7%.

All Singapore business must register for GST if their annual taxable revenue is more than S$1 million, or currently making taxable supplies and the annual taxable revenue is expected to be more than S$1 million. The business is expected to register for GST within thirty days from the time it is deemed liable.

You may also choose to register for GST voluntarily. Approval for voluntary registration is at the discretion of the Comptroller in IRAS. Once approval is given, you must remain registered for at least two years.
Registration of Singapore Central Provident (CPF): The Central Provident Fund or CPF is a compulsory pension fund scheme in which the employer and employee contribute a percentage of the monthly salary to the fund. CPF contribution by the employer is mandatory for all local employees who are Singapore citizens or permanent residents earning more than S$50 a month. The maximum CPF contribution rate for employer and employee is 14.5% and 20% respectively and can be lower depending on certain factors such as employee age, permanent resident status, etc. CPF contribution for foreign employees is not required.

Ongoing Singapore Company Statutory Compliance Considerations

Once your Singapore Limited Liability Partnership is incorporated, you must comply with the statutory requirements set by Accounting and Corporate Regulatory Authority (ACRA) and Inland Revenue Authority of Singapore (IRAS).

An LLP is required to maintain an accounting record complete with financial statements of its financial transactions. The manager of an LLP is responsible for the submission of the annual report on solvency or insolvency to ACRA. Must be made by the manager of the LLP within 15 months of the date of registration. The annual report will be made available to the public.

An LLP’s profit is taxed at Singapore personal income rate of each individual partner. When a partner is a corporation, its profit from the LLP will be taxed at Singapore corporate rate.

Tax on Singapore LLP

Singapore LLP, though a tax resident, is not considered as a company entity; therefore its profit is taxed at personal income rate. In the event where a partner is a company, its share of profit will be taxed at tax rate for companies.

Summary of Setup Requirements for Singapore Private Limited Company

  1. Minimum 2 Partners
  2. Minimum one manager who must be a Singapore resident
  3. A Singapore registered office address

SOLE PROPREITORSHIP

A Sole Proprietorship is the simplest form of business entity with only one owner who is the decisive authority and responsible for all assets and liabilities belonging to the business. Singapore citizens or permanent residents; holders of Employment Pass, EntrePass or Dependant’s Pass may register a Sole Proprietorship. Foreigner individuals and companies may also register a Sole Proprietorship but must appoint a Singapore resident manager.

Features of a Sole Proprietorship
  • It does not have a separate legal entity
  • The owner has unlimited liability
  • It cannot own property
Sole Proprietorship Requirements
  • Owner must be at least 18 years of age
  • Singapore Citizen/PR/EntrePass Holder/Dependant Pass Holder
  • Singapore Company/LLP can also register a business.
  • Singapore registered office address
  • Foreigner residing overseas can partner with locally resident person or Appoint local manager
  • Medisave must be paid up with CPF Board for yearly renewal
  1. 1
    Advantages
    • No annual returns filing required of a Sole Proprietorship as income is taxed at personal income tax rate.
    • Very few compliance requirements and written documentation
    • The business itself is flexible. Any decisions and changes can be made easily as there is only one person to make the relevant choices.
    • All the profits generated by the business will belong to the Sole Proprietor.
    • Sole Proprietor own his business and so are able to sell or transfer it as he wishes.
  2. 2
    Disadvantages
    • A Sole Proprietorship has unlimited liability. This means that the Sole Proprietor is responsible for all debts and losses of the business, which can put all personal assets at risk.
    • In the event of a business failure, the creditors can sue the sole proprietor for all debts incurred.
    • As there is only one person with overall responsibility for the success of the business this may increase the pressure on that individual.
    • If the registration of the sole-proprietorship/ partnership is not renewed on time, the Registrar has the authority to cancel the business.

What you need to know before registration

Business Name: The business name must be approved by ACRA before the Singapore Company can be incorporated. ACRA will reject a proposed business name if:

  1. It is identical to another existing Company Name
  2. It is undesirable
  3. Trademark which are similar to established names

Managers: Appointment of a manager for Singapore Sole Proprietorship is required only if it is registered by a foreign individual or company. The manager must be an “ordinarily” resident in Singapore, which means a Singapore citizen, a Singapore permanent resident; a person who holds an Employment Pass, Entrepass or a Dependants’ Pass.

Registered Address Every business registered in Singapore is required to have a registered office address. The registered address must be a physical address and cannot be a PO Box. Use of residential address is allowed for certain types of business.

Opening of a Corporate Bank Account: Once the Sole Proprietorship has been registered, you may open a corporate bank account with any of the local or international banks based in Singapore.

Post Incorporation – What you need to know

Licenses and Permits: Some business activities in Singapore are subject to regulation by government authorities. Even if your business firm has been registered you cannot begin operation unless you have the necessary approval or license from the relevant government authorities.

Private schools, video companies, travel agencies, liquor distributors, moneylenders, banks, Financial advisers, childcare centres and importers, wholesales and retailers of liquor licenses are some examples of business that need permits to operate. For more details, refer to Singapore Corporate Tax.

Registered Office Hours: You must have a registered office address and the office must be open to public for minimum of three hours per day during normal business hours on weekdays.

Registration Number: Business registration number issued by ACRA must be on all letterheads, invoices, billings or other documents used for official business communications.

Custom Registration: If your business activities involve import, export and transshipment in and out of Singapore, you will need to register your company with the Singapore Customs and obtain a CR Number or commonly known as Custom Registration. The central registration number is mandatory for Singapore companies or organizations casinos in australia engaged in trading activities.

Singapore Goods and Services Tax Registration: Goods and Services Tax (GST) is a tax on the supply of goods and services in Singapore and on the import of goods into Singapore. Goods exported from Singapore and international services provided from Singapore are exempt from GST. The current rate is 7%.

All Singapore business must register for GST if their annual taxable revenue is more than S$1 million, or currently making taxable supplies and the annual taxable revenue is expected to be more than S$1 million. The business is expected to register for GST within thirty days from the time it is deemed liable.

You may also choose to register for GST voluntarily. Approval for voluntary registration is at the discretion of the Comptroller in IRAS. Once approval is given, you must remain registered for at least two years.
Registration of Singapore Central Provident (CPF): The Central Provident Fund or CPF is a compulsory pension fund scheme in which the employer and employee contribute a percentage of the monthly salary to the fund. CPF contribution by the employer is mandatory for all local employees who are Singapore citizens or permanent residents earning more than S$50 a month. The maximum CPF contribution rate for employer and employee is 14.5% and 20% respectively and can be lower depending on certain factors such as employee age, permanent resident status, etc. CPF contribution for foreign employees is not required.

Tax on Singapore Sole Proprietorship

Singapore Sole Proprietorship, though a tax resident, is not considered as a company entity; therefore its profit is taxed at Singapore personal income rate. To learn more on the tax rates, please refer to Singapore personal tax rates.

In the event where the owner is a company the profit from the Sole Proprietorship will be taxed at corporate tax rate. To learn more, please refer to Singapore corporate tax rates.

Summary of Setup Requirements for Singapore Private Limited Company

  1. Minimum one owner.
  2. A Singapore registered office address.
  3. For foreign individuals and companies only: minimum one manager who must be a Singapore resident.

Incorporate Offshore Company

  1. 1
    Asset Protection

    You can protect your assets by setting up a Singapore offshore company incorporation in combination with a Trust. Choosing the right country to incorporate an offshore company can help you avoid unnecessary and high taxes that would otherwise be payable if the assets were held directly. It can also help protect assets from creditors, adverse claimants and other parties; or help you secure against future claims such as bankruptcy, judgment creditors and other litigants.

  2. 2
    Confidentiality

    Offshore Companies can offer you complete privacy. If the company shares are held by a Trust, the ownership is legally vested in the trustee, thus gaining the potential for even greater tax planning advantages.

  3. 3
    Estate Planning

    You can set up a Family and Protective Trusts (possibly as an alternative to a Will) with an offshore company for accumulation of investment income and long-term benefits for beneficiaries without high income, inheritance or capital gains taxes.

  4. 4
    Simplification of Transfer of Properties Held in Several Countries

    If you own properties in several different countries, you will understand that the sale or probate of properties can get complex and expensive. If an offshore company collectively holds these, the ownership can be transferred by company shares rather than transferring the actual properties owned by the company.

  5. 5
    Conduct Business with Low or No Corporate Taxes

    Certain countries such as British Virgin Islands allow the formation of international companies with no tax or reporting responsibilities. This means you save money not only from zero corporate tax, but also from reduced compliance and other regulatory costs.

  6. 6
    What is a Tax Haven

    A tax haven is normally known as a jurisdiction, which provides a lower tax alternative, which would otherwise be paid in a higher tax jurisdiction. A more correct term to use would be tax planning, because there are ways of mitigating taxes without breaking the law, whereas tax avoidance is generally classified as a crime. There are many countries in the world that are known to be tax havens, including some states in the US.

    Singapore is Not a Tax Haven

    The financial crisis in the past year has brought greater scrutiny on practices in the financial industry. Switzerland and Liechtenstein, two major private banking dominions, have been criticized as tax havens and are pressured to provide transparency and easier access to information of financial assets they manage.

    With the rising economies in Asia and an excellent business infrastructure, Singapore has grown to be the second-largest private banking center after Switzerland. It has, therefore, come under media scrutiny as purportedly a tax haven.

    ‘Singapore is not a tax haven,’ assured Lim Hwee Hua, Senior Minister of State for Finance and Transport. Singapore has decided to endorse the Organisation for Economic Co-operation and Development (OECD) Standard for the effective exchange of information. The decision further reinforces Singapore as a trusted center for finance and a responsible jurisdiction, with a reputation for strong rule of law. Singapore, however, does offer a favorable tax structure to encourage continual foreign investment. For example, Singapore’s corporate tax rate is now at 17% with several tax exemptions for new startup companies, and there is no capital gain tax in Singapore.

  7. 7
    The Low Tax Option

    Foreign investors can benefit from low or no tax rate on their offshore and international businesses as long as these businesses are structured and administered to benefit from the maximum tax breaks allowed in Singapore and other countries that have attractive low tax systems.

  8. 8
    Opening of Corporate Bank Accounts for Offshore Companies in Singapore

    With the strict rules in place for prevention of money laundering and terrorist financing, opening bank accounts in foreign countries has been increasingly difficult. However, opening corporate bank accounts for companies incorporated in Singapore is significantly easier. The stricter banking and finance regulations actually facilitate a more open and transparent process, and hence a simpler way to bring funds into Singapore.

Disclaimer: The information contained in this website is for general reference only. While all reasonable care has been taken in the preparation of this information, Alpha cannot accept any liability for any action taken as a result of reading its contents without further consulting us with regard to all relevant factors.