Pros and Cons of Opening a Limited Liability Company in Singapore

Singapore allows investors to open Sole proprietorship, Partnership, and a Limited Liability Company. However, if you are a foreigner thinking of setting up a business in singapore, you can only open a limited liability company, which can be a private limited company or a public limited company. We look at some pros and cons of opening a limited liability company.

Pros of a Limited Liability Company

Separate Legal Identity and Limited Liability

A Private Limited Company has its own legal identity, permitting the owners and beneficiaries to keep their resources separate from the business itself. This means that the business owners won’t have to use their resources to save the company if it goes under.

In the event that your organization runs into legal troubles, your company will be charged instead of you. Thus, apart from your funds, a limited liability company also provides the owners with legal protection in some cases. However, remember that you can’t do illegal activities. Furthermore, shareholders don’t need to pay for more than the share value.

Corporate Tax and Double Tax Agreements

Singapore has some of the lowest Corporate Tax Rates. Furthermore, the city-state has various Double Tax Agreements with foreign countries which prevent investors from paying double taxes when trading internationally.

The Singapore Corporate Tax rates are applicable for limited companies, and it can go up to a maximum of 17%. Furthermore, startups can get discounts on the final tax, and sometimes, the government releases incentives targeted towards limited liability companies.

A Professional Reputation

A limited liability company is a proper corporate. It has CEOs, branches, department heads, shareholders, etc. Thus, when your company is a Private Limited company, it portrays a professional image.

The Pvt. Ltd. that you get after registering your company as a private limited company increases your authority when making contracts, and agreeing on deals or making introductions. People are set to believe in you more.

Easier to Get Funds and Transfer of Shares

While opening a company, it may be difficult to get funds if you open a sole proprietorship and partnership. Investors are keener to give money to limited liability companies because they have better management and more chances of success.

Another benefit of a limited liability company includes ease of transfer of shares. Unlike the ownership in a sole proprietorship or a partnership, shares can easily be transferred between shareholders and even to the public in a public limited company.

Cons of a Limited Liability Company

These are the reasons you may not want to open a limited liability company:

Complicated Authority

If you open a sole proprietorship or a partnership, the business decisions are more flexible, as you (and your partners) will be making the decisions. However, if you open a private limited company, the decisions are based on the board of directors meeting, which may also consist of representatives from all around the office. A single person doesn’t have the freedom, and sometimes, even the beneficiary may be fired from the company’s position.

Incorporation Takes time and Requirements

Registering a sole proprietorship or a partnership doesn’t have special requirements. However, a limited liability company requires resident director, secretary, a registered address and particulars about the board members. To make it easier for foreigners so that they don’t get confused in the process, the government has made it possible for them to hire a representative. On the other hand, the ‘representatives’, or the Corporate Service Providers, also help locals with business incorporation Singapore.