All set and ready to go? The next step would be to make it all official by incorporating your business and turn it into a legal entity! But you may have a question in mind. Why should I incorporate my business? Why can’t I continue doing business without incorporating it?
Well, in this article, we will explain to you exactly why you should incorporate your company in Singapore.
Protecting personal assets
This applies to LLCs and Private Limited Companies. However, sole proprietors can apply to change their business structure to one of those. To learn why you should do so, here is a link to an article written about the topic.
As a business owner, incorporating your business will make sure that you are not liable for any lawsuits or claims against the business entity which you have registered. It is a separate entity from yourself and thus if your business goes into deep debt, your own personal assets like your car and house cannot be affected. The company’s debt only belongs to the company.
Legitimising your business and making it official adds instant credibility and authority to your business. Plenty of people will not do business with a company that has not been incorporated because it does not convey trustworthiness or stability. To start a good relationship with your clients, suppliers and anybody else, you have to incorporate your business to show that credibility. There’s just something better about having PTE.Ltd or LLC after your business name. Thus, incorporating your business will benefit you in brand-building and marketing as well.
Protecting your business
When you incorporate your business, you guarantee that the business will continue to exist even if there is a change in its ownership or management. This is unlike a sole proprietorship where you are the business. When you leave it, or die, the business will cease to exist. Therefore, by incorporating, you ensure that the legacy of the business is preserved.
Tax flexibility and Benefits
If you are either a sole proprietor, or have not incorporated your business, you will be paying personal income taxes from the profits of the business. As a LLC or PLC, you will be paying the corporate tax rate of 17% which is lower than income tax rates. Furthermore, the Singapore government has provided a host of incentives such as tax exemptions for new incorporated businesses as well. If you are not incorporating your company, you are missing out on these exemptions and grants. To learn more about these benefits, click here.
As you start out on your business, you may find yourself cash-strapped and having to raise funds for your business to buy inventories or pay salaries etc. There are plenty of options to raise funds but the two most common ones are borrowing from a bank or financial institution, or seeking external investment from investors. Both requires the incorporation of your company. The bank will require you to have incorporated the company before lending the money to your company. Otherwise, you will be borrowing the money under your own name, which will expose your personal assets to the debts you incur.
Investors cannot invest in an unincorporated business. Why? Because if it has not been incorporated, it is unable to sell its shares. In order to take on co-owners or issue stock by selling ownership shares, a company must be incorporated.
These are a few reasons on why you should incorporate your company in Singapore instead of continuing your business without registering it. The next article in the series is about the steps to incorporate your company in Singapore. To learn in detail on how to incorporate your company, you can read this article.
For other types of corporate services. you can find the best services recommended for you based on hundreds of companies reviewed on our platform.