With attractive corporate tax incentives and an equally inviting business environment for foreign and domestic entrepreneurs, Singapore remains one of the premium business hubs in Asia for numerous business owners.
For entrepreneurs looking to start a new business in the country, there are various decisions they have to make before incorporating their new company, one of which is deciding on their organisation’s corporate structure. However, with the multiple options available, it can be challenging for business owners to make the choice they feel is suitable for their company.
If you are an entrepreneur facing this same dilemma, we recommend registering your start-up as a Limited Liability Company (LLC) due to the various benefits this corporate structure offers you. Let us share why an LLC corporate structure is the ideal option for you.
1. Limited liability protection
A sole proprietorship business structure may seem particularly enticing for many entrepreneurs, given the minimal paperwork involved and the relatively low registration fee. However, in the eyes of the law, a sole proprietorship is viewed as the same legal entity as its owner. If you fail to pay your dues to your suppliers or creditors, your personal assets are not protected against court-order claims.
Conversely, an LLC is a separate legal entity. As such, in the event of a legal dispute, other parties can only sue the business and not its owners via the provision of limited liability. In essence, the liability of business owners, partners, and shareholders are only limited to their investments and contributions to the company, so your personal assets are fully protected.
2. Complete control over the business
Not only does an LLC provide you with limited liability, but it also retains the best feature of a sole proprietorship business structure. While the shareowner owns the business and the director runs the company in an LLC corporate structure, it is possible for you to fulfil both roles.
This means you still retain complete control over your business. You can settle any decisions regarding the business’s operations and other matters independently, without the need to go through partners or even a board of directors.
3. Eligible for tax benefits
Incorporating your small business as an LLC grants you access to tax benefits, which are not available to a sole proprietorship. Because LLCs are considered separate legal entities, your business will be taxed at the corporate rate rather than a personal level for a sole proprietorship.
Under a sole proprietorship business structure, your tax rate can be as high as 22% if your business profits exceed SGD$320,000. The profits are viewed as the owner’s salary and therefore taxed based on the owner’s personal income bracket.
Comparatively, the income tax rate for businesses in Singapore is capped at 17%. Furthermore, new companies get to enjoy 75% exemption on the first SGD$100,000 of chargeable income and 50% exemption on the following SGD$100,000 of chargeable income for their first three consecutive years of assessment.
4. Professional identity improves public perception
Incorporating your company helps establish a professional identity, increasing your business’s credibility with consumers, vendors, and business partners. Your business now has legitimacy in the public’s eyes, which may encourage more people to patronise your products and services, thereby increasing your revenue. Similarly, many companies are more comfortable working with an LLC than a sole proprietorship.
Conclusion
For new entrepreneurs, incorporating their businesses as an LLC offers them a straightforward and flexible structure. Not only do they get to enjoy lucrative tax incentives and limited liability, but they also get to retain full control over their company.
So if you are looking to start a new business venture, consider incorporating it as an LLC. At Ackenting Group, we offer hassle-free company incorporation services to fulfil your every need. With our experienced team assisting you, you can rest assured that your business meets every incorporation requirement. In addition, we provide a suite of reliable tax and accounting services to help you plan your business’s tax, ensuring you fulfil your company’s tax obligations without incurring any penalty.
If you require any assistance on accounting services, feel free to drop us an email at johnwoo@ag-singapore.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.
