A Company and a Limited Liability Partnership (LLP) are both incorporated entities which mean that they have a separate legal personality from their ownership. We encounter a lot of queries about which business structure is best recommended for people looking to set up business structures and more often than not, we usually gravitate and recommend the company structure.
The main reason for recommending the company structure would be its limited liability status. This is also a feature of an LLP. This is why most clients gravitate towards these two business structures. However, despite the fact that the costs associated with running an LLP may be lower than a company, there are many reasons to choose a company structure over an LLP.
Lower Corporate Taxes
Corporate taxes are lower than personal income taxes. The highest tier of income tax rates is 22%. In comparison, corporate taxes are set at a flat rate of 17%. There are also many tax incentives and rebates that are available to Singapore companies that can bring the effective tax rates much lower (i.e. less than 10% and for startups this can be less than 5%). This is one of the primary reasons why most people gravitate towards a company structure eventually.
Ability to Raise Capital
In an LLP, the ability to raise capital is limited by the partners’ ability to provide finances and contributions. Instead, a company can raise capital by selling more shares. There is no limit to the number of shares a Singapore registered company can issue, so long as this is done in accordance with the Companies Act and the company’s constitution.
Ability to Transfer Shares
There are no shares in an LLP. Instead, a company has shares that can be transferred. The management and ownership of the company are vested in the directors and shareholders respectively. Thus the shareholders may sell their shares or include their shares in their wills to be passed on to their beneficiaries. This flexibility of buying, selling and transferring shares is a characteristic that many find important and thus decide on the company structure eventually.
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If you are looking to clarify which company structure is most suitable for your model of business, do contact us at [email protected].
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Singapore Secretary Services
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