A private limited company is a LLC in which the shares are held by less than 50 persons and are not available to general public. Most privately incorporated businesses in Singapore are registered as private limited companies. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd. The shareholders of a private limited company can either be individuals or corporate entities or both. A private limited company is the most advanced, flexible, and scalable type of business incorporation in Singapore.
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Why entrepreneurs prefer Private Limited Company;
1. Separate Legal Entity : A private limited company has its own legal identity, separate from its shareholders and its directors. It can acquire assets, go into debt, enter into contracts, sue or be sued in its own name.
2. Limited Liability: The liability of the members to contribute to the debts of the company is limited to the amount that they each agreed to contribute as capital to the company.
3. Perpetual Succession: The company’s existence does not depend on the continued membership of any of its members. Ease of transfer of shares or changes in shareholders ensures that company continues to exist even in the event of death, resignation, or insolvency of shareholders or directors.
4. Ease of raising capital: You can raise capital for expansion or other purposes by bringing in new shareholders or issuing more shares to existing shareholders. Investors are more likely to purchase shares in a company where there usually is a separation between personal and business assets. Also, most banks prefer to lend money to limited companies.
5. Credible Image: As an incorporated business entity, it commands a better image than a sole proprietorship or a partnership firm, and investors will be more willing to become part of the company as it demonstrates a vision to grow and expand. As a Pte Ltd company, your business will be taken more seriously by your potential clients, suppliers, bankers, and other professionals you will be dealing with.
6. Easier transfer of Ownership: Ownership of a company may be transferred, either wholly or partially, without disrupting operations or the need for complex legal documentation. This can be done through the selling of all or part of its total shares, or through the issue of new shares to additional investors.
7. Tax Benefits and Incentives: A Singapore private limited company is a very efficient tax entity. The effective corporate tax rate for Singapore companies for profits up to SGD 300,000 is below 9% and capped at 17% for profits above SGD 300,000. Furthermore, there is no capital gains tax. Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level, dividends can be distributed to shareholders tax free.