Best practices for setting up a private limited company in Singapore
In Singapore, you have a wide variety of options when it comes to registering a new business. You can opt for a sole proprietorship, limited liability partnership, or a private limited company. However, setting up a private limited company in Singapore is the best option. Business owners also prefer, to a lesser extent, to register proprietorships. However, the Pte Ltd stands out as the natural option for a long-term player.
Starting a Small Business in Singapore
You might have heard that the Pte Ltd companies are only for big players. If you have heard this advice before, ignore it! You can very much start a small business in the form of a private limited company. A Pte Ltd has the rights of the natural born person. It has an independent identity and can sue or be sued by others. It can get into contracts with others and buy or sell properties.
You may find that the company formation cost in Singapore is higher than the cost of registering a sole proprietorship or a limited liability partnership. However, Pte Ltd is the right legal structure if you are looking for the personal liability protection.
Personal assets are not used to pay the debts or losses of the Pte Ltd. And, it is easy to sell and transfer its shares and go looking for another adventure. So choose the right business structure and let your incorporation agent worry about how to register a Pte Ltd company in Singapore.
Running a new company in Singapore is not a joke. You have to master various tasks and there are a lot of chances for you to make a mistake. The learning curve is steep for newbie entrepreneurs. However, you can maximize success by avoiding the common mistakes described below.
1. Starting a Business in Singapore Without a Competent CPA
The process to register a company in Singapore for a foreigner or a local entrepreneur is the same. However, before committing your resources to it, it would be wise to seek out advice from a CPA (Certified Professional Accountant).
The expert can advise you on how different legal structures would affect the taxation of your business, or government grants or tax exemption schemes it can claim. In Singapore, a CPA firm can act as your incorporation agent. So, it makes sense to hire one as your Singapore company incorporation services provider.
2. Forming, then Running a Singapore Company Without Licenses
You cannot simply start your business activities after setting up a private limited company in Singapore. First, you must check whether you need any business licenses or permits. If you need them, you should ask your agent to apply and acquire them for you. It would be a great mistake to start your activities without one. Failure to acquire the necessary documents could result in heavy fines or penalties.
3. Setting Up a Business, then Failing to File
ACRA (Accounting and Corporate Regulatory Authority) has extremely strict guidelines regarding paperwork and timely filing. It expects Singapore companies to be prompt in updating their company register folder, payroll, and books of accounts.
ACRA also expects company directors to take the initiative and be prompt with their annual filing and XBRL filing. You may be running a new company, but you still have to assess whether or not it needs GST registration. Your services providing firm can assist you with the GST filing as it can with other taxes (including corporate tax).
4. Incorporating a Singapore Business then Failing to Sell
If you want to continue to run your business, you need to sell your products to generate revenue and maintain cash flow in your favor. You will not be able to survive for long without doing this.
You will have to offer pro customer deals in order to gain their loyalty. Even the most successful company needs its loyal customer base. Without it, the company can lose its way and find it tough to navigate certain difficulties.
5. Starting a Company then Failing to Fix the Capital You Need
You must have sufficient capital to operate your business. Even the bootstrappers trying to embrace the entrepreneurship with the patched-up funds must cover business’ liabilities with enough revenues, assets, capital, or insurance.
This does not mean that you will need a train-load of capital to back your adventure. The amount may also depend on the type of the business you are operating and whether you deal with the public (B2C) or other companies (B2B). You must discuss business’ finances with an experienced CPA who can assist you in determining how much capital you should actually possess. It is essential to know your metrics beforehand.
Why You Should Set Up a Private Limited Company
Setting up a private limited company in Singapore is an excellent option for startups and small business owners. It offers limited personal liability, credible brand image, ability to raise funds for future expansions, access to tax exemption schemes, etc. And, unlike a proprietorship or partnership, a Pte Ltd has perpetual existence.
If you are a first-time business owner, seek the guidance of an expert or mentor as early as possible. It may cost you, but you will successfully avoid making mistakes and damaging your credibility and brand name.