A Comprehensive Guide to Singapore Limited Liability Company and Private Limited Company (PLC)

LLC and PLC

A Limited Liability Company (LLC), as its name suggests, pertains to a type of business structure where the liability of shareholders is only to the extent of the amount of their capital contributions. The concept of limited liability makes the personal assets of owners safe and immune from satisfaction of corporate debts since liability attaches only to their investment in the company.

Various Forms of Singapore LLC

There are three different types of Singapore LLC, these are:

  • Public Limited Company

    A Public Limited company in Singapore is allowed to have more than 50 shareholders and its shares are open to acquisition by the public. By publicly offering debentures and shares, it is able to raise more capital to sustain its operations. Because its business involves transactions with the public, rules and regulations that govern Public Limited Companies are much more stringent than private limited companies. Registration of a prospectus with Monetary Authority of Singapore is required prior to any intended sale of shares to the public so that details of the stock offerings and debentures are known to potential buyers and protect them from the fraudulent investments.

  • Public Company Limited by Guarantee

    As opposed to other types of Limited Liability Companies, a public company limited by guarantee is ideal for undertaking non-profit activities which are of national interest. The formation of this public company is anchored on the business principle of limiting the liability of its members to their respective contributions in the company.

  • Private Limited Company (PLC)

    Private Limited Company, commonly abbreviated as ‘Pte. Ltd.’ is the most popular among the Singapore LLC structures to choose from.  In various jurisdictions, Private Limited Company is the same as LLC.

The popularity of Private Limited Companies amongst entrepreneurs is due to its many interesting features, among these are:

Characteristics of Singapore Private Limited Company (PLC)

  • Independent legal entity

    A private Limited Company, by operation of law, is granted a juridical personality that is distinct from its owners and shareholders. In the eyes of law, it is a person which is vested with rights and imposed certain obligations.

  • Limited Liability

    The liability that shareholders may incur is only limited to the extent of their investment in the company. This feature is what makes Private Limited Companies so attractive, because in the event of unforeseen obligations, shareholders remain insulated from being burdened by liabilities and their personal assets continue to be free from any attachment or seizure via court order in satisfaction of corporate debts. As long as their shareholdings are fully paid, shareholders are not obligated towards company creditors.

    To illustrate, when the company undergoing liquidation or winding up is discovered to have incurred specific contractual obligations which remain unpaid, the creditors can only enforce the contractual liability against the company itself, including the shares of the stockholders, but not as to their remaining personal assets.

  • Maximum of 50 shareholders

    In a private limited company, a minimum of 1 shareholder and a maximum of 50 shareholders is allowed. If the number of shareholders might exceed this number, then establishing an unlisted public limited company may be the better alternative. Since 100% foreign ownership is allowed, all shareholders may be foreigners. Shareholders may either be natural persons, corporate entities or a mixture of both.

  • It is flexible and can be used for various purposes

    A private limited company is a flexible entrepreneurial vehicle, which meets the varying needs of any entity seeking to do business in Singapore. In fact, it can be used to establish a corporate presence in Singapore or hold assets for and in behalf of investors (in the case of a special purpose vehicle) or manage long-term investments for real estate business and debt handling (in the case of a holding company).

Powers of a Private Limited Company

Among the powers of a Private Limited Company are as follows:

  • It is allowed under law to own real and personal properties.

    A Singapore PLC can register its ownership over the properties it acquired by virtue of sale or any other modes of acquisition under its own name.

    • It can participate in legal and litigation proceedings.

      This means that a Singapore PLC can sue and be sued in courts of law, for purposes of prosecuting a claim for its name against third persons or defending against a claim filed against it by such parties.

    • It is capable of perpetual succession.

      This means that the existence of a Private Limited Company still continues notwithstanding a change in the structure of shareholdings or death of any of its shareholders. It still allows for easy transferability of shares even if there are deaths or change in stockholders.

    Registration Requirements of a Private Limited Company

    Singapore PLC Registration

    The registration of a Private Limited Company in Singapore is usually done with the Accounting and Corporate Regulatory Authority in Singapore. Under normal circumstances, the incorporation of a Private Limited Company can be done in the shortest time possible (within a day) and while incurring only a minimal amount of resources. Among the requirements for this corporate set up are the following:

    • At least one resident director who must be ordinarily resident of Singapore. The director must then be an individual who is a Citizen or a Permanent Resident of Singapore or one who has secured an Employment Pass Entrepreneur Pass and currently residing in Singapore, at least 18 years of age, and not declared by virtue of court order to be a bankrupt or previously convicted of a crime
    • At least one corporate shareholding is necessary for setting up a Singapore PLC
    • Initial paid up capital must at least be $1. Paid up capital refers to the amount of subscribed shares that is already paid upfront by the company.
    • At least one Corporate Secretary of the company who shall be a resident of Singapore. The secretary should satisfy the minimum qualification requirements under the Singapore Companies act regarding accreditations and lack of disqualifications.
    • At the time of incorporation, the company must have a valid office address in Singapore which is not a P.O. Box
    • An approved company name which is original and ideal for brand identity. It is forbidden under Singapore’s IP Law to use a corporate name which is undesirable and deceptively or confusingly similar to any existing trademarks or corporate names.

    Incentives vs Disadvantages of Setting up a Singapore Private Limited Company

    IncentivesDisadvantages
    A Private Limited Company is a corporate body, seen in the eyes of law as a juridical person vested with rights and obligations to which it must comply.Setting up a private limited company in Singapore is cumbersome as there are strict requirements under the Singapore Companies Act that must be complied with at all costs.
    Shareholders have limited personal liability, hence liable only to the extent of their capital contribution. Personal assets of shareholders are safe.Costs for setting up and maintaining its growth may be higher. Also, there are lots of formalities and statutory procedures to maintain. There are pre-incorporation, post incorporation requirements and annual filing requirements to consider.
    It has perpetual succession and continuity, meaning it does not cease to exist even if the shareholders die or transfer their sharesSince statutory compliance requirements are mandated, hiring of bookkeeping, accounting services as well as corporate secretarial services is essential but may likewise be costly.
    Transferability of shares is easy, as shares can be transferred to any buyer. Also, appointment of additional shareholders is allowed.
    It may avail of certain tax exemptions (for startups) and tax deductions prescribed by the Inland Revenue Authority of Singapore
    For Singapore PLC, 100% foreign share holdings is permitted.


    Why Hiring Corporate Services Singapore Is Beneficial to your Business

    One of the critical things to consider when setting up a business in Singapore is to determine the best entrepreneurial vehicle that suits your long-term objectives. If you’re unsure of what corporate medium to use to pursue your business idea, talk to our licensed incorporation experts. To discover more about how to set up a Limited Liability Company in Singapore, and understanding its strict statutory requirements, feel free to get in touch with us and seek our professional advice.

Posted in Company Incorporation.