With a framework that allows a wide range of business structures to choose from, it’s no question why Singapore is the business hub that it is today, with both local and international companies choosing to set up camp here in the country. As we dive into the different frameworks and entities available for business owners in Singapore, let’s take a closer look into Limited Liability Companies and the basics of this business structure.
Commonly known as an LLC, a Limited Liability Company is a corporate business structure that has a separate legal identity from its owner, hence the name. By combining several corporation and partnership features, this grants their members flexibility and growth in the company without having their personal assets be at risk.
In Singapore, there are three types of LLCs: a Private Limited Company, Public Limited Company, and a Public Company Limited by Guarantee.
Private Limited Companies are an LLC that has a separate legal identity, where the shares belong to 50 people or less and are not available to the public. This type of LLC is one of the most preferred business entities in Singapore as it is the most flexible, advanced, and scalable business form amongst others. As opposed to sole proprietorship and partnerships, this type of business entity is suitable for more serious entrepreneurs as it offers a more credible image towards potential investors and clients.
Unlike a Private Limited Company, Public Limited Companies (PLCs) have the option to offer their shares to the general public, which is the biggest advantage for this business entity. In turn, this can lead to increased capital for investment and more potential for growth and expansion. However, since this business structure requires the company to be listed on a stock exchange, they are subject to more rigid regulations and need to regularly report their financial health to their shareholders and potential shareholders. This option is best for large businesses who have the ability to generate high profits. Otherwise, a different LLC may work better for you.
Unlike both Private Limited Companies and Public Limited Companies, Public Company Limited by Guarantee is generally set up for non-profitable purposes. To set-up a non-profit entity in Singapore, your organisation can only engage or support in activities that will not involve commercial or monetary profit. Pte. Ltd. Companies are created for the sole objective of generating profit, while PLCs are able to issue public shares, which is why they don’t fall into this category. Non-profit organisations that are registered under this business structure could be groups that raise awareness for the arts, environmental issues, and women’s rights, or perhaps even a charity.
This is one of the most apparent benefits of registering your business as an LCC. Having limited liability as a business ensures that there is a legal boundary between the company’s profit and your personal assets. Should the company incur any debts or business liabilities, the claimants will hold the company at large and will not go after the personal assets of each shareholder or member.
Through the PLC structure, businesses can get better access to capital through public shares. Once any company is listed on a stock exchange, potential investors from anywhere in the world may choose to invest in your company, which will in turn raise your overall capital. Having stock listed on the exchange can also attract investments from institutional traders, hedge funds, and mutual funds.
Unlike other business entities such partnerships and sole proprietorship, LLCs tend to have a more credible and reputable image in the corporate world, which can give your business more finance opportunities. Due to the nature of this business structure that has more members, compliance regulations, documentation, and other requirements, customers, vendors, and investors are more likely to invest in LLCs compared to other business entities.
Regardless of which type of LLC you register your business under, it is important to consider how you will manage your corporate funds in the long run. A good way to safeguard your company’s finances is to set up a separate account for all business matters.
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