A company is a business entity registered under the Singapore Companies Act, Chapter 50. Unlike a business firm such as a sole proprietorship or partnership, it has a legal personality i.e. it has rights to own properties, can sue or be sued. It usually has the words 'Pte Ltd' or 'Ltd' as part of its name. In many European or the USA, it is commonly known as a Corporation.

A private limited company has its own legal identity, separate from its shareholders (who own the company) and its directors (who manage the company). Companies pay corporation tax on their profits, Shareholders receive dividends which are tax free under the Singapore new one tier tax system and directors pay income tax as employees officers on any remuneration paid.

One of the major advantages of a limited company is that the shareholders are not liable for the company's debts beyond the amount of share capital they have subscribed, provided there has been no deceit, fraud or malpractice.

Another advantage of such a company is that it is easy to transfer the ownership, either wholly or partially, through the selling of all or part of its total shares, or through the issue of new shares to additional investors. There is no need to wind up the company in the event of deaths, or changes amongst the shareholders or directors.

In Singapore, a company can be incorporated in one of the following ways:

There are two types of Private Companies Limited by Shares

Private Company

This is a locally incorporated company where the number of shareholders is limited to 50.

Exempt Private Company

An exempt private company is a private limited company, of which all shares are not held directly or indirectly by any corporation (i.e. another limited company), and which has not more than 20 members. An exempt private company need not file its annual accounts with the ACRA for the information of the public as long as the company files a Certificate of an Exempt Private Company, that the company is able to meet its liabilities as and when they fall due.

Advantages

• Limited liability for shareholders. This means that if the company fails, the shareholders may lose the entire value of their shares but no more, unless they have given guarantees.

Disadvantages

• Companies are governed by tighter rules and regulations than partnerships. For example, they must follow the detailed rules and procedures set out in the Companies Act. Company accounts must show more information than the accounts of a partnership and companies must have at least one director and one company secretary.