The Differences Between Registering a Company and Incorporating It
Before forming a business in Singapore, you must understand the difference between registering a company and incorporating a company to align with your long-term goals. Doing so can help you own and run a tax-efficient, scalable, and pro-growth company to conduct your business activities.
Incorporating a Company
By incorporating a company, you create a legal business with a distinctly separate identity from its owner. You have to file Articles of Incorporation and pay official fees to ACRA (Accounting and Corporate Regulatory Authority), the Company Registrar of Singapore.
A private limited company limits your liability to the amount you have invested in its shares. Your assets are not used to pay for the loss or debt, An incorporated company is responsible for paying its debts and losses. Its assets are used to do so. In many cases, the court often honours the corporate veil unless there is proof of fraud.
Private limited companies have a credible image in the eyes of creditors, lenders, banks, VCs, angel financiers, etc. They can leverage it to raise capital.
The benefit of incorporating a company is that it exists perpetually. It is not affected by changes in its members, shareholders, or owners. It exists until it is dismantled and dissolved.
A company is a legal person. It has the rights of a natural-born person. It can buy assets and real estate in its name.
Registering a Company as A Business Firm
By registering a business, you create a business firm like a Sole Proprietorship with no separate identity from its owner. It dissolves when the owner dies. Then, its assets are sold.
As the owner of a Sole Proprietorship, your liability is unlimited. Your assets can be used to pay for business debts and losses.
A sole proprietorship cannot buy real estate or assets in its name. Its assets are in your name. And you have to pay property tax on it out of your pocket.
The income of a proprietorship is considered the income of the proprietor. And you have to pay personal income tax on this income. And the tax rate is higher than corporate tax. Singapore-incorporated companies pay corporate income tax.
Financial institutes like banks find it hard to fund a sole proprietorship. It makes it hard to raise funds for expanding the business activities of the proprietorship. It depends on your charisma, credibility, and network in the market.
Which is Better, a Company Or a Business Firm?
Incorporating a company is not the only option open to you. You can also think of registering a company or business firm to obtain business licenses. And as a matter of fact, an incorporated company also needs licenses and permits for its business activities.
Sometimes, they need to acquire special licenses to conduct their activities. A prominent example is that of financial companies.
The main benefit of company registration in Singapore is that the investors or general public can go through the registry and find your name and contact information. A private limited company is differentiated from other businesses by using the term ‘Pte Ltd’ in its name.
Registering a company (business firm) is cheaper than incorporating it.
- A sole proprietorship or a limited liability partnership costs only $115 to register
- On the other hand, you need $315 to incorporate a private limited company
In addition, you must pay for various business licenses and permits before starting your business activities.
Most importantly, registering and incorporating company differs in the complexity of documents you must supply to ACRA. ACRA needs them in ‘English’. If they are not, it is your responsibility to get them translated into ‘English’ from a reliable source.
After successfully incorporating a company, ACRA sends you an email. It is a soft copy of your Incorporation Certificate. It contains details of your company like Unique Entity Number (UEN), business profile, etc.
When it comes to incorporating a company or registering a company as a firm, you can hire a provider of incorporation services. The foreigners must hire an incorporation agent as they cannot set up company in Singapore on their own.
All you need to do is submit your incorporation documents and a list of 3 – 5 company names to your agent. They visit ACRA’s portal, check and register the available company name and initiate the process online. They pay ACRA’s fees for registering a company name and incorporating a company.
These agents are experts. They can solve many of your doubts. We will advise you on choosing the best business structure, incorporating a company in Singapore and how to acquire business licenses and permits.
If you still cannot choose between registering a company and incorporating a company get in touch with us. Call us at +65-6536 0036 or message us at email@example.com to learn more.