Suppose that you are the owner of a small coffee shop in a Singaporean city. You have registered your business as a sole proprietorship, and things went really well. Soon enough, you were ready for expansion, which would mean that your business structure will not fit the description of a sole proprietorship anymore. The next step would be to have your coffee shop incorporated.
That hypothetical scenario shows the importance of knowing the advantages of incorporating companies and the steps needed to complete this process. If you are a business owner with a long term vision, then you may want to consider incorporation. Here are some things that are worth keeping in mind about incorporation in Singapore.
Importance of Having Your Company Incorporated
Companies in Singapore fall under three business structures: sole proprietorship, limited liability partnership, and private limited. Among these three modes, most businesses prefer to be categorized as private limited, so they undergo incorporation.
But, why is being incorporated sought-after by a lot of entrepreneurs? It is because of the multiple benefits of having a private limited company. Some of these include:
- Tax Incentives and Exemptions. Corporate taxes are expensive, and most of the time they cause a significant dent in the budget of a business. Incorporation would open the door for tax incentives and also exemptions from the Singaporean Government. For instance, a private limited company is only taxed at 4.5% for the first $100,000 net profit during its first three years of operation.
- Safety of Shareholders. Upon incorporation, the company becomes considered as a separate legal entity. Therefore, the shareholders will not be liable in case the company suffers from debts or losses.
- Room for Growth. Expansion is one of the most attractive reasons for having your business incorporated. Once it gains recognition as a private limited company, your business can then be opened to the public.
Steps Involved in the Process of Incorporation
The registration and incorporation of all business entities in Singapore are managed by the Accounting and Corporate Regulatory Authority (ACRA). The minimum requirements set by ACRA for businesses seeking incorporation include at least one shareholder, a director, a company secretary, a Singapore address, and a share capital. You should make sure that you meet these prerequisites.
As soon as you have ascertained that your business can fit the description of a private limited company, you can proceed to submission of the following documents:
- Unique company name (pre-approved by ACRA)
- Shareholders Agreements
- Information about Shareholders and Directors
- Singapore-based Address
- Memorandum and Articles of Association
The period after passing these documentary requirements is mostly for waiting, although there are times when ACRA calls for an interview or requires submission of more documents. Waiting for the entire process to be completed varies per company. Normally, however, if you are transferring your business structure from a sole proprietorship to a private limited, idle time would be shorter.
Once ACRA is done with the incorporation, they will send a series of documents. One of the most important is the Company Business Profile, which carries the Unique Entity Number (UEN) of the company. The UEN is an essential identifier of a private limited company. It is also used for transactions with the government and other companies as well.