When it comes to selecting the most suitable business structure for your new business venture, navigating the choice between a Private Limited (Pte Ltd) company and a Limited Liability Partnership (LLP) requires careful consideration of various factors. Let’s look at a detailed comparison of Pte Ltd and LLP across key dimensions:
Pte Ltd: Mandatory appointment of a local director and a corporate secretary
LLP: Mandatory appointment of at least one manager who is a local resident. No statutory obligation to appoint a company secretary.
| Private Limited Company (Pte Ltd) | Limited Liability Partnership (LLP) | |
|---|---|---|
| Number of owners | Minimum of 1; Maximum of 50 | Minimum of 2 partners; No maximum limit |
| Who can set up | Any foreign &/or local individual &/or company Must appoint a local director | Any foreign &/or local individual &/or company Must appoint a local manager |
| Best for | Most popular, advanced and scalable business structure Eligible for tax exemptions and ease of raising capital | Hybrid structure blending partnership and corporate elements Ideal for professionals like lawyers, architects, consultants, and accountants |
| Legal status | Separate legal entity distinct from its shareholders | Separate legal entity distinct from its partners |
| Liability | Limited liability for shareholders | Limited liability for partners |
| Raising capital | Can raise capital via share issuance Easier to get access to funding from banks and investors | Raising capital through bank loans can be challenging as it depends heavily on the partners' credibility |
| Grant eligibility | Meets the criteria for Startup SG and various business grants. | Limited availability of business grants and ineligible for Startup SG grants. |
| Taxation | Taxed at a flat rate of 17% | Taxed at personal income tax rates each partner Corporate partners will be taxed at corporate tax rates |
| Tax exemptions | Eligible companies can claim 75% tax exemption on the first S$100,000 of their chargeable income Companies ineligible for the tax exemption scheme can still benefit from partial tax exemption (75% exemption on the 1st $10,000 of chargeable income; plus additional 50% exemption on the subsequent $190,000) | Personal tax relief if applicable Corporate tax relief if the corporate partner is eligible |
| Formalities | More costly to set up (registration fees, ongoing compliance costs, etc) Must appoint a company secretary within 6 months of incorporation Must maintain proper records and financial transactions for at least 5 years from the relevant Year of Assessment Must file annual returns | Quicker to set up One time registration Annual declaration of solvency must be lodged |
| Government set up fee | $315 ($15 name application fee; $300 incorporation fee) | $115 ($15 name application fee; $100 incorporation fee) |
| Business Continuity | Perpetual succession until wound up or struck off Difficult to transfer ownership | Perpetual succession until wound up or struck off Easier to transfer ownership through sale or purchase of company shares |
☞ Is a Private Limited company the same as a Limited Liability Partnership (LLP) in Singapore?
While both Pte Ltd companies and LLPs offer limited liability protection to their owners, they differ in terms of ownership structure, compliance requirements, and taxation.
☞ Can LLPs be converted to Pte Ltds and vice versa?
Yes, LLPs can be converted to Pte Ltds and vice versa, subject to certain conditions and regulatory requirements.
☞ Can foreign individuals or entities register as owners of Pte Ltds or LLPs? Yes, both Pte Ltds and LLPs allow foreign individuals and entities to register as owners or partners, subject to certain restrictions and compliance requirements.
What are the annual compliance requirements for Pte Ltds and LLPs? Both Pte Ltds and LLPs have similar compliance requirements, including filing annual returns and financial statements. However, Pte Ltds have additional annual compliance requirements, such as holding annual general meetings and appointing auditors (unless exempt).
☞ Which structure offers better tax benefits, Pte Ltd or LLP?
The choice between Pte Ltd and LLP depends on various factors, including the specific circumstances of the business and the tax objectives of the owners. Both structures offer different tax benefits, and it’s essential to consult with tax professionals to determine the most advantageous option for your business.
Setting up a company in Singapore can be challenging, but with professional support, it can be simple. Counto’s mission is to support your new business, take away the complexities of compliance, and save you time and money throughout the year. Speak to us directly on our chatbot, email us at [email protected], or contact us using this form.
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