Singapore has, for more than a decade now, proven to be exceptionally friendly to both local and foreign businesses. The World Bank’s Ease of Doing Business Index currently ranks it as the second-best in the world. And, while the city-state supports six different types of businesses, the private limited company happens to be Singapore’s most commonly preferred corporation.
So, what’s the fuss about running a private limited company in Singapore? Why exactly do foreign and local businesses go for this category? And where do you even start when you need to set up a private limited company in Singapore?
This guide answers all the questions you might have about private limited entities in Singapore, as well as the requirements for private limited company registration in Singapore. Then to top it off, we also reveal what you should do after setting up a private limited company in Singapore.
What is a Private Limited Company in Singapore?
A private limited company, for starters, is one of the limited liability companies that are registered and governed by Singapore’s Accounting and Corporate Regulatory Authority. But, unlike public limited companies and companies limited by guarantee, a private limited company comes with very exclusive and independent shareholding privileges.
That means you won’t be forced to trade the shares publicly through the stock market. Instead, ACRA expects members of a private limited company in Singapore to hold and control their shares privately, based on the rules they set out in their company constitution.
According to the Singapore Companies Act, individuals and corporate organizations are both allowed to take up equity in a private limited company in Singapore. Such members are collectively known as shareholders, and their company stakes are quantified in the form of shares.
That said, you can identify a private limited liability company in Singapore based on the name alone. ACRA typically registers the business names with suffixes like “Ltd”, “Pte Ltd”, or “Private Limited”.
Then when you dive deeper, you’re bound to notice the additional features that distinctly set private limited entities apart from the rest of the corporations in Singapore. This is where you discover the principal benefits that ultimately convince all sorts of entrepreneurs to incorporate a private limited company.
Why Set Up a Private Limited Company?
Main Features of a Private Limited Company in Singapore
Come to think of it, the best thing about an LTD in Singapore is its limited liability status. The company itself is set up as a distinct legal entity, separate from its shareholders.
Consequently, you cannot be held personally responsible for the company’s liabilities and debts. The Companies Act protects your personal assets from all the legal implications that may arise from the company’s debt disputes. It can even file for bankruptcy without affecting its shareholders.
Number and Type of Shareholders
It’s worth noting, however, that there are restrictions when it comes to the number of shareholders. An LTD in Singapore is only allowed to proceed with a minimum of 1 shareholder and a maximum of 50. What’s more, you can register both individuals and company entities as shareholder members.
Number and Value of Shares
But, get this. Contrastingly, the Companies Act doesn’t limit the accompanying share volume. Members of an LTD in Singapore can go ahead and register as many shares as they want. That won’t affect the company’s overall equity allocation.
Rather, your stake in an LTD is calculated based on the percentage of shares you hold. With 500 shares, for instance, you can be said to own 50% of an LTD with 1,000 shares, or 25% of one with 2,000 shares. Such percentage values determine the corresponding fraction of profit and capital you’ll be entitled to.
In the end, therefore, you can establish the total share capital by multiplying the cumulative number of shares by the corresponding nominal share value.
Minimum Paid-Up Capital
And while you’re at it, please note that the minimum paid-up capital for a limited liability company in Singapore is S$1. Nonetheless, you’ll be free to increase the company’s paid-up and share capital after incorporation.
The Trading of Company Shares
Another privilege that comes with an LTD in Singapore is unrestricted share trading. You can transfer the shares internally or, in case you’re trying to raise capital, allow third-party investors to buy their way into the company. You just need a private sale agreement that adheres to your company’s constitution.
But, that’s not all there is to the constitution.
The Company Constitution
The constitution document that you submit during the LTD registration in Singapore will govern pretty much all the company operations and interrelationships between shareholders. That’s why, as a matter of fact, ACRA previously described it as the Memorandum and Articles of Association.
Sadly, however, your company’s constitution won’t save you from the numerous compliance responsibilities that come with this type of corporation. Registration of company in Singapore is even said to be a little bit costly and cumbersome because of its complex compliance intricacies.
But, on the bright side, at least it manages to make up for all that trouble with these outstanding benefits...
Pros and Benefits of a Singapore Private Limited Company
- The company is recognized as a distinct legal entity with its own liabilities, thus protecting your personal assets from being roped into any dispute along the way.
- A Singapore private limited company exempts you from trading the shares publicly.
- You can set up a Singapore private limited entity with one member and as little as S$1 in paid-up capital.
- Singapore’s Companies Act allows private limited companies to engage in profitable activities, and subsequently divide the returns between members.
- You can freely transfer company ownership by trading shares internally with other members, or externally with third parties.
- The share capital and number of shares are not fixed. Hence, you could expand the company and raise capital by selling off some of the shares to new investors.
- Since membership and shareholding are fluid, private limited entities are virtually perpetual. That means each company has a fair chance of outliving its original founders.
- The Inland Revenue Authority of Singapore grants private limited companies a wide range of tax benefits.
- Each Singapore private limited entity is free to purchase and own property, including real estate.
- Financial institutions in Singapore treat private limited companies as distinctly bankable units. That means organizations get to set up their own bank accounts and lines of credit, which then come in handy during loan applications.
Interested on how Private Limited Companies compare to Sole Proprietorships? Read our article here.
Setting Up a Singapore Private Limited Company
Documents and Requirements for Singapore Company Registration (Pte Ltd.)
Now, as it turns out, setting up a Singapore private limited company is not as simple as registering a sole proprietorship, partnership, or a company limited by guarantee. There are quite a number of requirements and documents you’ll need during and after the incorporation process.
That said, here are the key essentials each LTD in Singapore is required to have:
- An initial paid-up capital of not less than S$1.
- A valid physical company address.
- At least one shareholder, who can be an individual or corporate entity.
- At least one director, who should be a Singapore resident.
- At least one company secretary.
As for the documents, ACRA expects you to attach the following to your Pte Ltd. registration in Singapore:
- A unique and original company name.
- Your director’s personal details.
- The personal details of each shareholder.
- The company’s constitution (previously known as the Memorandum and Articles of Association), explicitly stating all the management rules, the company’s activities, as well the overall membership and shareholding structure.
- A description of the company’s physical address.
- An explicit shareholders agreement.
- A company registration fee of $300.
How to Set Up a Singapore Private Limited Company
If you have everything ready, you can proceed to set up a private limited company in Singapore by following this procedure:
- Start by registering a unique and original business name with ACRA, through the official BizFile+ website. This alone should cost you about S$15, after which ACRA will reserve the name for 120 days.
- Once ACRA approves the business name, proceed to the company incorporation section of the BizFile+ site, and start setting up a new local company.
- On the company registration form, pick private limited company as your preferred company type, and then attach its name as well as the accompanying documentation- the company constitution, address information, plus the personal details of all the members.
- In the end, private limited company registration in Singapore is bound to cost you S$300. And when you combine that with the business name registration fee, the total cost will be S$315.
- If everything checks out, you should be able to incorporate the private limited company in as little as 1-3 days. ACRA is pretty efficient when it comes to reviewing and setting up new corporate entities.
Make no mistake though. Registration is just the first step to setting up a private limited company in Singapore. There’s still so much more that you’re expected to do after incorporation.
What Should You Do After Setting Up a Private Limited Company in Singapore?
Incorporating an LTD in Singapore means you’ll be getting an incorporation certificate, a share certificate, plus a company business profile.
However, the kicker is, you still won’t be able to kickstart your operations in Singapore. Not until you comply with the post-registration requirements that come with private limited businesses.
And to help you with that, here’s a breakdown of the steps you should follow right after incorporation:
- Apply for the relevant business permits and licenses. A good place to start would be the Singapore GoBusiness Licensing Portal.
- Hold the First Board Resolution within the first month of incorporation. This is a special meeting for confirming the company’s directors.
- Open a corporate bank account with one of the many local and international banks based in Singapore.
- Appoint a company auditor within 3 months of incorporation.
- Appoint a company secretary within 6 months of incorporation.
- Apply for Goods and Services Tax (GST) if your company’s yearly taxable income goes beyond S$1 million.
- Register for the Singapore Central Provident Fund (CPF) pension scheme.
- Hold an Annual General Meeting (AGM) with the company’s shareholders every year.
- File your company’s annual returns within 30 days from the date of the AGM.
- File your company’s corporate income tax every year by November 30th.
- Apply for the relevant government incentives and schemes. You could, for instance, consider the Enterprise Financing Scheme, Startup SG Tech, or Startup SG Accelerator. Singapore has a rich variety of options to choose from.
Where to Start
These guidelines should make it easy for both locals and foreigners who are planning to set up a private limited company in Singapore. But, you can still make the whole process much easier, faster, and thorough by working with a specialized company incorporation service provider such as WealthBridge.
Besides, ACRA strongly advises all types of entrepreneurs to save themselves the trouble and proceed with this option, as incorporation service providers like WealthBridge know all there is to know about setting up companies in Singapore, as well as the subsequent processes of maintaining corporate compliance over the long haul.