Private Limited Companies (Pte Ltd)

A private limited company is a separate legal entity which can own assets, incur debts and enter contracts independently of its shareholders. If you want to scale your business, attract investors while protecting your personal assets, Private limited companies may be what you’re looking for.

Key features:

• Maximum number of 50 shareholders
• Shareholder’s liability is limited to their investment
• “Pte Ltd” or “Private Limited” must be included in its name
• Tax exemptions under the Start-up Exemption (SUTE) or Partial Tax Exemption (PTE) schemes

Pros:

Limited liability

• Shareholders are only liable for their own investments, and not for the company’s debts.

Credibility

• Pte Ltd companies are typically seen as more professional and reliable. This would attract more customers and investors.

Separate legal entity

• The company can enter contracts and sue using its own name.

Cons:

Costlier

• Higher costs for incorporation and accounting

Compliance and requirements

• More paperwork and legal compliance
• Must appoint at least one resident director and a company secretary
• Required to file annual returns 

Privacy

• May be required to file information like financial statements publicly

Exempt Private Companies (EPC)

EPCs are private companies that meet the following criteria:

1. Has fewer than 20 shareholders
2. Has no corporate shareholders
3. Is incorporated under the Singapore Companies Act

EPCs are eligible for tax exemptions under the Start-up Exemption (SUTE) or Partial Tax Exemption (PTE) schemes. 

Pros:

Lower compliance requirements

• Audit exemption given if their annual revenue is below SGD 5 million

Confidentiality

• Not required to file information like financial statements publicly if they qualify for audit exemptions

Cons:

Limited shareholders

• Maximum of 20 shareholders, which could restrict the company’s growth

No corporate shareholders

• ECPs cannot be businesses owned by other companies

Subsidiary Companies

A subsidiary is formed under Singapore’s Companies Act. It is controlled by another company, referred to as a parent company. The parent company needs to own at least 51% of the subsidiary company’s shares. The subsidiary company operates as a separate legal entity, which means it can own assets, incur debts and enter contracts independently of its parent company.

Such companies are eligible for tax exemptions under the Start-up Exemption (SUTE) or Partial Tax Exemption (PTE) schemes

Pros:

Limited liability

• The parent company’s liability is limited to its investments in the subsidiary company — the parent company is not responsible for the subsidiary debts

Local presence

• Subsidiary companies allow their parent companies to have a greater local presence

Cons:

Management complexity

• The parent company must constantly work closely with the closely with its subsidiary to ensure alignment and clear communication

Double the taxes

• A subsidiary company may be subjected to taxes both in Singapore and in the home country of the parent company.

Public Limited Companies

A public limited company is a company that can sell and trade its shares on a stock exchange, like the Singapore Exchange (SGX), with the public freely. It is typically larger in size than a Pte Ltd. A Public limited company must have at least two directors and there is a minimum share capital of SGD1.

Such companies are eligible for the Partial Tax Exemption (PTE) scheme.

Pros:

Ability to raise capital

• A PLC is able to raise funds by issuing shares to the public. This would aid them in expansion and growth

Flexibility for shareholders

• Shareholders are able to freely buy and sell their shares on stock exchanges.

Lower financial risk

• With more shareholders, this would spread out the financial risk with a larger group of people.

Cons:

Costly 

• Setting up a PLC involves high costs and legal fees
• Additional costs like auditing fees

Vulnerability

• PLCs are highly affected by the volatile global market conditions. The fluctuation of the PLC share price can affect the company’s development.

Requirements

• PLCs must ensure to be compliant with the rules of ACRA, the Monetary Authority of Singapore (MAS) and the SGX.

Lack of control

• Due to the large number of shareholders, this reduces the amount of control you have over the company. In general, processes such as decision-making processes would become more complicated and time-consuming

Holding Companies

A holding company is a company that owns and controls other companies, such as subsidiary companies. However, they do not directly involve themselves in their business operations. Their role is mainly to hold investments, assets and shares of other companies. 

What’s the difference between holding companies and parent companies?

A holding company is usually set up with the purpose of controlling the share of other companies, and does not engage with its subsidiary’s business operations. Holding companies are eligible for the Partial Tax Exemption (PTE) scheme.

A parent company controls the company, and may also be actively involved in its subsidiary’s business operations. Parent companies.

Pros:

Asset protection

• Assets that are held by the holding company are protected from any risks from its subsidiaries

Business structure flexibility

• Subsidiaries of holding companies can operate independently as legal entities. Typically, the risks and liabilities of one subsidiary company does not affect the others

Cons:

Extra taxes

• A holding company may be subjected to taxes both in Singapore and in the country of its subsidiary companies.

Complexity of structure

• Holding companies add another layer of complexities to your business. There would be more entities to manage, complicating processes such as legal processes.

Family Offices

Family offices are private companies owned by wealthy families or individuals. Its employees provide personalised services to help manage the family’s financial needs, such as tax planning and wealth management. There are 2 main types of family offices: 

1. Single Family Office (SFO): Serves one family
2. Multi-Family Office (MFO): Serves multiple families

Pros:

Staying wealthy

• Family offices allow wealthy families to preserve their wealth, and plan for their future for generations to come

Personalised service

• A family office allows for customised services that specifically meets the financial needs of the family

Cons

Minimum Asset Threshold

• To qualify for certain tax exemptions such as Section 13X, the family is required to be managing at least $200 million in assets

Compliance

• A family office is required to adhere to Singapore’s regulatory requirements, including the Monetary Authority of Singapore (MAS) guidelines and rules. This often requires professional expertise.

Variable Capital Companies (VCC)

A Variable Capital Company (VCC) is a flexible company type mainly used for investment funds. It helps you manage money from multiple investors and lets you change how much money you have in the company with ease. 

Pros:

Flexibility

• With a VCC, you can easily share and issue shares without permission or additional complications. This eases the process when dealing with investors.

All under one roof

• With a VCC, you can create multiple sub-funds under one VCC. This means that different sub-funds can have different investments, but they are all directly linked under one company. Ultimately, this can save you time and make it easier to manage your investments.

Cons:

Costs

• Setting up a VCC is costly, with additional fees and expenses required, such as hiring a fund manager.

Regulations

• As VCCs handle investments, it comes with extra sets of rules and regulations that need to be complied — meaning more documents and paperwork to be done.