According to ACRA, more than 70% of business entities in Singapore are registered as companies. This makes it the preferred (and likely most obvious) choice for business owners registering their business entities with ACRA.
If we wish to register our business entity as a company with ACRA, we should note that there are actually seven types of company structures that business owners can choose from.
For new business owners, some of these company types may not be viable options in the first place. Nevertheless, it can be important to distinguish the different company types that we can incorporate in Singapore.
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Private Companies
There are the four types of private companies that can incorporated, with an exempt private company being the most popular choice for SMEs.
#1 Exempt Private Company
Singapore’s Companies Act defines an exempt private company (EPC) as a company that is either a private company with less than 20 individual shareholders or is a government-owned company and is declared as an EPC by the Minister.
This is the most common type of company structure in Singapore, which requires a paid -up share capital of at least $1. Shareholders of the company will only have a limited liability based on their initial investment in the shares of the company.
Unlike a normal private company, an EPC can either use the “Pte Ltd” or “EPC” abbreviation.
There are multiple benefits to using this structure. Solvent EPCs have less compliance requirements compared to non-EPCs. Previously, an EPC with revenue of less than $5 million was exempted from auditing its financial statements, however, this has now been revised to include all private companies as long as they meet two of the three following requirements for the immediate past two financial years:
- Have total revenue less than $10 million;
- Have total assets less than $10 million; or
- Have no have more than 50 employees.
Additionally, solvent EPCs only need to make an online declaration of their solvency and the filing of the financial statements is voluntary, whereas for the other structures of the private company, the filing must be submitted in the XBRL format.
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Second, new EPCs can tap into the tax exemption scheme for new start-up companies provided they are neither an investment holding company nor involved in the development and sale of real estate.
This scheme, which was introduced to support and encourage the growth of local companies, was further revised in the Year of Assessment (YA) 2020. Companies can get tier tax exemptions of 75% on the first $100,000 and a further 50% exemption on the next $100,000 of normal chargeable income for the first three consecutive YA.
Read Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions
A third benefit of using the EPC structure is that it allows the company to extend loans to its directors, whereas non-EPCs are generally prohibited from doing so under the Companies Act.
#2 Unlimited Exempt Private Company
The company structure of an unlimited exempt private company follows much the same way as an exempt private company, aside from the unlimited individual liability that each shareholder has towards the company’s debt.
#3 Private Company Limited By Shares
If there are more than 20 shareholders, a company can be structured as a private company limited by shares. There can be a maximum of 50 shareholders, including corporations.
To incorporate a company under this structure, a paid-up share capital of at least $1 is required. Moreover, the company is treated as a separate legal entity and the shareholders are not liable for the debts of the company beyond the amount of share capital.
Furthermore, shareholders can receive a share of the profits made by the company as dividends.
#4 Unlimited Private Company
An unlimited private company structure is similar to a private company that is limited by shares, except that the shareholders have an unlimited individual liability towards the debts of the company owed to its creditors.
Companies of this structure can be incorporated with or without any share capital.
Public Company
A public company can be structured in the following three ways, with the most common being a public company limited by share structure.
#5 Public Company Limited By Shares
Most people might be familiar with this type of company structure. A public company that is limited by shares means the liability of shareholders to the company’s creditors is limited to the original capital invested by the shareholder. There can be more than 50 shareholders under this structure.
This type of company structure allows the public company to be listed on the stock market and referred to as “listed companies”. Needless to say, companies with this structure will also contain the “Limited” or “Ltd” suffix at the end of their names.
Public companies that wish to list on the local Singapore Stock Exchange (SGX) must register their prospectus with the Monetary Authority of Singapore (MAS). Once listed, these public companies can raise capital from the public by issuing new shares or bonds.
#6 Public Company Limited By Guarantee
Companies that carry out non-profit making activities of national or public interests such as charitable works or the promotion of arts, can incorporate their firm as a public company limited by guarantee. Their company names will also carry the “Limited” suffix.
Companies with this structure are not required to have any share capital. Furthermore, the liability of its members is limited to the amount that they have undertaken to contribute towards the assets of the company as specified in the company’s constitution.
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#7 Unlimited Public Company
An unlimited public company is similar to that of a public company limited by shares except that its shareholders have no limit placed on their individual liability to contribute to the debts of the company.
Though companies are rarely structured this way, certain professional organisations (such as accounting or legal firms) or companies that need to show a high standard of commitment may incorporate their public company with an unlimited liability structure.
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