What is a Private Limited Company (Pte Ltd) in Singapore

Registering your business as a Private Limited company is one of the most popular and strategic moves you can make. But what does a private limited company mean? A private limited company, also commonly known as Pte Ltd in Singapore, is a separate legal entity. Its owners and shareholders are not personally liable for the company’s debts and losses beyond their investment. This business structure also offers various benefits. In this article, we will cover the registration process, the advantages and disadvantages, and the tax obligations of private limited companies.

Let’s jump right in.

How to Register a Private Limited Company in Singapore

After learning about what a private limited company is, the next step is to register a private limited company in Singapore. There are several steps involved in this process, and here are the key steps:

Choose a business name: Select a unique name that isn’t identical to an existing business and doesn’t contain inappropriate words. Submit the proposed name to the Accounting and Corporate Regulatory Authority (ACRA), a governing body which oversees business registration in Singapore, for approval.

Choose the financial year-end (FYE): Choosing your financial year-end is crucial for a business as it sets the schedule for your company’s annual tax and filing deadlines. For a private limited company, the first FYE must be within 18 months from the date of incorporation. You are also required to hold an annual general meeting (AGM) within six months after your FYE and file your annual returns within seven months of the FYE.

Choose a local director: Registered companies must have at least one local director who is a Singapore citizen, permanent resident, Entrepass holder or Employment Pass (EP).

Appoint a company secretary: You must appoint a company secretary within six months of your incorporation date. Failing to comply will result in fines and penalties.

Provide a Registered Office Address: A registered office address is required, and it must be located in Singapore. It should also be open to the public for at least three hours daily during business hours.

Issuance of Shares and Share capital: When incorporating a private limited company, you must issue shares to initial shareholders, specifying the number and value of shares. This establishes the company’s initial share capital, defines ownership, and determines each shareholder’s control. The share capital also reflects the total investment at incorporation and is recorded in the company’s constitution and statutory registers.

Draft a Company Constitution: Before registering a private limited company, it’s essential to draft a company constitution. This legal document outlines the company’s governance structure and defines the roles, rights and responsibilities of key personnel.

Appoint a Data Protection Officer: Businesses in Singapore are required to appoint a data protection officer to ensure they comply with the Singapore Personal Data Protection Act.

While the registration process is straightforward, foreign startups must engage a registered filing agent to submit their application to ACRA through BizFile+ on their behalf. This agent can be a corporate secretarial company like Lanturn. Although local entrepreneurs are not required to use a filing agent, it is strongly recommended that they do so to simplify the process.

Advantages of Registering a Private Limited Company

As a leading financial hub in Asia, Singapore offers an attractive business environment with access to global markets, making it an ideal place for entrepreneurs to start or grow a venture. One of the first steps is choosing a business structure, with the private limited company being a popular option. Here are the key advantages of registering a Singapore private limited company:

Limited Liability Protection

Owners and shareholders of a private limited company have limited liability, meaning they only risk losing the amount they’ve invested. This protects their personal assets and gives them the confidence to take business risks without fear of total financial loss. make decisions

Separate Legal Entity

A private limited company is a separate legal entity from its shareholders, protecting their personal assets from business debts and liabilities. This separate legal entity allows your company to enter into contracts, hire employees, and own assets in its name, enabling company growth and expansion opportunities.

Tax Benefits & Corporate Incentives

One of the things that attracts entrepreneurs to establish a business presence in Singapore is the favourable tax regime. Private limited companies in Singapore enjoy a corporate tax rate of 17%, and new startups can benefit from a 75% tax exemption on the first S$100,000 of chargeable income for their first three years. Additionally, startups in Singapore that meet the qualifying conditions under the Tax Exemption Scheme for New Start-up Companies can access further tax exemptions, allowing them to retain more profits for growth and expansion.

Foreign Ownership

Singapore permits foreign entrepreneurs and foreign-owned entities to hold 100% of the company’s shares. They simply need to appoint a nominal director who must be a resident of Singapore.

Disadvantages of a Private Limited Company

While registering a private limited company has its advantages, there are also disadvantages. Here are some key challenges of this business structure:

• Private limited companies in Singapore are governed by the rules and regulations set out in the Companies Act, which they must comply with. Failure to comply will result in penalties.
• Companies must file annual returns and directors’ reports, so they must appoint at least one director and a company secretary.
• Directors must disclose their interests in the company’s shares, contracts and debentures.
• The administration requirements and increased disclosure lead to higher operating costs.
• ACRA holds company directors responsible for ensuring the company’s compliance with the Companies Act.

Why Incorporate a Private Limited Company

Incorporating a business in Singapore is an excellent way to bring your business ideas to life. It offers perpetual succession, ensuring the company continues even if the shareholders or directors change, providing business continuity for long-term planning. This structure enhances credibility with potential investors and improves your reputation with the public as a professional and trustworthy company. Additionally, it makes raising capital easier by issuing shares to existing or new shareholders, providing flexibility to attract investment and expand operations.

Tax Obligations for Private Limited Companies

After registering your business as a private limited company, it doesn’t stop there. There are still other tax obligations to fulfill. Understanding the corporate tax requirements is crucial for ensuring tax compliance. Let’s explore these corporate tax requirements:

Corporate Tax Requirements

Currently, Singapore’s corporate tax rate is 17%, which applies to all local and foreign businesses.

Private limited companies are required to file two Corporate Income Tax Returns:

• Estimated Chargeable Income (ECI)
• Chargeable Income (CI) – Form C-S/Form C-S (Lite)/ Form C

ECI must be filed within three months after the end of the fiscal year. Similarly, CI is a mandatory tax filing and must be completed and filed by 30 November each year. Late filing may result in penalties and legal consequences.

This includes reporting your company’s income earned in the previous financial year, known as the Year of Assessment (YA). The process consists of declaring chargeable income after deducting tax-allowable expenses, capital allowances and reliefs.

Private Limited Company Registration Made Easy with Lanturn

Incorporating your business as a private limited company in Singapore offers benefits like scalability, credibility, perpetual succession, limited liability protection and separation from its owners. While there are requirements and challenges, such as choosing key personnel and filing annual returns, these shouldn’t discourage you from setting up your business in Singapore. Lanturn is here to assist with end-to-end solutions, from company registration to providing timely updates on your application. We also offer post-registration support, including filing annual returns and managing proper tax records to ensure your company fully complies with Singapore’s statutory requirements. Trust us to handle your paperwork while you focus on growing your business. Speak to us today!