Incorporation is the legal process used to form a corporate entity or company.
Incorporating a business has a lot more impressive advantages compared to both sole proprietorship and general partnership. Some of the few advantages are; limitation of liability, excellent tax benefits, perpetual existence and also having a robust economy in Singapore.
Limitation of Liability
Unlike Sole Proprietorship and Partnership, incorporating your business creates a legal wall between your personal life and your business life. This protects your personal assets as creditors can only seek payment from the assets of the company, and not from the personal assets of the owner, shareholders and workers.
Sole Proprietorship and Partnership on the other hand, does not have a separate legal entity, thus putting their personal assets at risk. Having limited liability for its members is one of the major reasons for setting up an incorporated company.
Excellent Tax Benefits
Singapore is a country with one of the lowest tax rates in the world, and in addition to that, Singapore provides numerous tax incentives and cash grants to further aid the growth of businesses.
Companies will be able to enjoy many excellent tax benefits such as, the corporate tax rate in Singapore is 17%. Also, qualified new start-up companies will be able to benefit from 75% tax exemption on the first S$100,000 of normal chargeable income for the first three years of assessment. In addition, a further 50% exemption is given on the next S$100,000 of normal chargeable income for the first three years of assessment.
All companies including companies limited by guarantee can enjoy the following tax exemption of 75% exemption on the first S$10,000 of normal chargeable income and a further 50% exemption on the next S$190,000 of normal chargeable income.
Lastly, corporate income tax rebate is given to all companies to ease business costs and support restructuring by companies. They will receive a 25% corporate income tax rebate, capped at S$15,000.
Unlike Sole Proprietorship and Partnership, an incorporated company has the characteristic of perpetual existence. It is able to continue to exist indefinitely unless the business goes bankrupt or merges with another business.
Death of the owner or changes in the management does not affect the life of the company in any way. Whereas for both Sole Proprietorship and Partnership, they will cease to exist when the owner dies or leaves the business.
Having a perpetual existence also means having perpetual succession, thus giving the company a safer and a more stable area for investors to invest their money on and enhance the chances of their investment being a success.
In addition, the company’s directors are able to establish a long term project for profit growth of the company due to its perpetual existence, thus increasing the chance of the company to be able to succeed in the future.
Robust Economy in Singapore
Doing business in Singapore has a lot of benefits as Singapore is the World’s second easiest place to do business. From a business perspective, Singapore is known for its transparency, strong legal framework and is specialized across industries such as chemicals, biomedical sciences, petroleum refining, mechanical engineering, and electronics. In addition, Singapore eases trade through an influential supply chain management as well as efficient logistics infrastructure.
With our pro-business environment, excellent infrastructure, cost-competitiveness and highly skilled labour force, we are well placed to serve the fast-growing markets of the Asia-Pacific region, thus making us the most competitive Asian country.
For more enquiries regarding incorporating a company, do contact us.