Understanding Difference Between a Public and a Private Company in Singapore

While establishing a business in Singapore, the one of the most crucial steps is choosing a right business structure. In order to align with your business goals, a choice must be made that’s suits better your business needs. In this blog we will be exploring the key differences between a Public Company and a Private Company highlighting the advantages, and the drawbacks by focusing on the impact the structure has on taxation, compliances and overall business strategy.

What is a Private Limited Company?

A private limited company is a locally incorporated company where the maximum number of shareholders is limited to 50. However, if the company is incorporated as exempt private company, which is the most popular structure in Singapore, number of shareholders is limited to 20. It is a common choice to set up an investment holding structure starting with a Singapore entity before expanding/investing to the rest of Asia.

There are two types of private limited company i.e. entity limited by shares and exempt private company. Private companies have separate legal entity from its shareholders, meaning it is also recognized as a taxable entity. Shareholders of a private limited company will not be liable for its debts and losses beyond the amount of share capital they each own.

As such, private limited companies are usually required to have a suffix “Private Limited”, “Pte Ltd” or “Ltd” as part of their company name. The registration of companies in Singapore is done through the Accounting and Corporate Regulatory Authority (ACRA). If you are not registered with ACRA, you cannot do business in Singapore.

What is Public Limited Company?

Different from a private limited company, the shares of a public limited company are often available to the general public. These companies will be found on the stock exchange.  The number of shareholders is a minimum of at least 50 people. Given that these types of companies involve the public at large, there are more rules and regulations that avoid exploitation and the misuse of public funds. This option is best for large businesses.

Here are some of the key distinctions between private and public companies in Singapore:

Ownership and Shareholders:

A private company has a limited number of shareholders (maximum 50), whereas a public company can have an unlimited number of shareholders. Private companies often have a more concentrated ownership structure, with shares held by a small group of individuals or entities.

Capital Raising:

Public companies can raise capital from the general public by issuing shares through an initial public offering (IPO) on a stock exchange. In contrast, private companies typically raise funds through private investments or loans from individuals, venture capitalists, or banks.

Disclosure Requirements:

Public companies have more stringent disclosure requirements compared to private companies. They are required to publish their financial statements and other relevant information to ensure transparency for investors. Private companies have fewer reporting obligations and can maintain confidentiality.

Transferability of Shares:

Shares of public companies are generally freely transferable, allowing shareholders to easily buy or sell their shares on the stock exchange. On the other hand, shares of private companies are often subject to restrictions on transfer, and the process requires the consent of other shareholders or the company.

Regulatory Framework:

Public companies are subject to extensive regulations and oversight by the Accounting and Corporate Regulatory Authority (ACRA) and the Singapore Exchange (SGX). Private companies have more flexibility and fewer regulatory requirements.

Corporate Tax Rate

Both Private and Public Companies are taxed at the same corporate tax rate in Singapore, which is a flat rate of 17%.

Tax Exemptions

Small private limited companies are eligible for startup tax exemptions on the first SGD 2,00,000 of normal chargeable income for the first three years of Assessment. In which,

·         75% exemption on the first S$100,000 of normal chargeable income; and

·         A further 50% exemption on the next $100,000 of normal chargeable income

From the fourth YA onwards, companies can enjoy the partial tax exemption.

Generally, Public Companies do not qualify for startup tax exemptions but all companies, including companies limited by guarantee, are eligible for partial tax exemption (PTE), unless they are claiming the tax exemption for new start-up companies. Partial Tax Exemption on first S$200,000 of Chargeable Income for qualifying companies are as follows:

• 75% exemption on the first $10,000 of normal chargeable income; and
• A further 50% exemption on the next $190,000 of normal chargeable income.

Summary of the Key Differences between Pte Ltd companies and Public Ltd Companies in Singapore.

Looking to set up a business in Singapore but unsure which company structure suits you best? Water & Shark offers expert analysis and guidance to help you choose between Private Limited (Pvt. Ltd) vs. Public Ltd Company. Our experienced Chartered Accountants provide hassle- free setup, ensuring compliance and optimal tax planning to maximize your growth. Contact us at singapore@waterandshark.com for consultation and let us be trusted partner in navigating Singapore’s Business Landscape