When Should a Freelancer Register a Private Limited Company?
Are you a freelancer working in Singapore? Yes! It would help if you immediately opted for company registration in Singapore. There are solid reasons for you to do it. It legitimizes your money-making business activities. It simplifies your tax filing. Forming a private limited company lends you credibility and enables you to bid for high-ticket projects.
When should you do it?
Well, there is no precise moment in time to set up your private limited company. It depends on the scale and scope of your business activities. If you are operating at a significant level, do it. However, if you intend to run it under your full name, there is no need to register your business with ACRA.
Singapore Private Limited Company
An individual over the age of 18 years, local or foreign, can form a company in Singapore. It is a scalable, robust and credible business structure. You can structure your private limited company to be a highly tax-efficient entity.
A Private limited company has:
- Distinct legal identity from its shareholders or directors
- Minimum of 1 and a maximum of 50 individual or corporate shareholders
- Foreign individuals and companies can own 100% of its shares
- It pays corporate tax which is in the range of 0%-17% whereas sole proprietorship & partnerships pay personal income tax (0%-22%)
Advantages Private Limited Company
Before you set up a company in Singapore, you should invest time in understanding its advantages and disadvantages.
1. Protection to Personal Assets
A private limited company limits shareholders’ liability to their capital in its shares. Your assets are not used to pay its debts or losses. It can sue or be sued in its name. Shareholders are kept out of court. A private limited company assists you in separating business and personal assets.
As a freelancer, you will be answerable to your creditors. They can sue you personally. They may drag you to court for non-fulfilment of contract or delaying a project. The court proceedings take time, and your business may suffer. Your assets may take a beating.
A private limited company enjoys credibility with investors, lenders, suppliers, & customers. It has a brand image. It helps you in securing funds from willing investors for its expansion.
3. Perpetual Existence
A private limited company do not depend on its shareholders for its existence. It goes on existing even when those who run it has passed away. It continues with another successor. It is easy to change the ownership of its shares, and it does not affect its existence.
4. Corporate Income Tax
The company pays corporate income tax on its profits. It is not the shareholders’ responsibility. The dividend they receive attracts no tax in Singapore.
5. Startup Tax Exemption
Your new company benefits from Start-up Tax Exemption Scheme. For first 3 years, it gets 75% tax exemption on its first $100,000 chargeable income and, next, $200,000 get 50% tax exemption its chargeable income.
On the other hand, registering a Singapore private limited company means you have expended resources on staying compliant with the ACRA and IRAS laws. You have to file an annual report, hold AGM and do the necessary paperwork.
The process to form a Singapore company is streamlined. A reputable registered filing agent can help you register it in 1-3 days. You need to supply them with a list of names for your proposed company. They can check and register the available one for your use. Then, they can apply to ACRA to register your Singapore company.
Freelancing enables you to pick the challenges and time to overcome them. You should do it in a legalized way. If you need any assistance for company registration in Singapore, contact us on +65-6536 0036 or mail us at email@example.com.