Incorporating Non-Profit Entities in Singapore
In Singapore, you are required to register a non-profit organization (NPO) for supporting or engaging in activities of social or public activities without the intention of making monetary or commercial profits. In situation when there are excess funds, it will not be distributed amongst the members and instead it will be retained and used by the organization for future activities and operation purpose.
NPOs in Singapore are also known and referred to Voluntary Welfare Organizations (VWOs) and under Singapore regulations, it is can be registered as the following entities type:
- Public Company Limited by Guarantee
- Charitable Trust
Before you decide on the type of entity you would incorporate for your non-profit organization, there are various factors that you will have to consider such as the scale, legal responsibility, source of funds etc to determine the best non-profit entity that is most suitable for you. This guide will elaborate on each of the entities in details.
Public Company Limited by Guarantee for Non-Profit Entity
Incorporating a public company in Singapore limited by guarantee is the most advantageous structure for NPOs. This entity type have a distinct benefit among the three options which is it have a separate legal entity with limited liability for the members. Typically, public companies limited by guarantee are often used for social purpose such as religious, charitable, scientific and or inventive activities etc.
Introduction to Public Company Limited by Guarantee
A public company limited by guarantee mainly operates non-profit activities and operations such as charity, museum, foundation that is of national or public interest. It has a separate legal status from its members and can be sue and be sued in its name.
This entity structure unlike private limited companies has no share capital and shareholders. Instead, it has members who guarantee to contribute an agreed sum of funds to the liabilities of the company in event that the company faces liquidation. The liability of the members is limited and the guarantee sum can be as low as 1 Singapore Dollar.
The company must at all times have at least 2 registered directors, 2 members and 1 qualified corporate Secretary.
One of the directors appointed and its corporate secretary must be Singapore Citizens, permanent resident, or individual holding an employment pass.
The public companies limited by guarantee are also required to include the term “Limited” as a suffix in its name.
Public companies are also required to submit it’s Memorandum & Articles of Association during the company incorporation Singapore process.
Similar to a registering a private limited company in Singapore, public company limited by guarantee are also hold their annual general meeting and file its annual returns with ACRA every year without fail. It is also subjected to public disclosures obligations and statutory compliance imposed following the law of Singapore. However, compared to private limited companies, annual reporting requirements are more complex and may not be suitable for small groups.
Taxation for Public Company Limited by Guarantee
Public Company Limited by Guarantee are exempted from income tax provided that the surplus funds are from members or 50% of its gross taxable receipts are from its members and are non tax-deductible for the members. However, if the company after registration applied for full Charity status, they will be eligible for full tax exemption.
Introduction to Society
A society can be form with at least 10 individuals and are also known as a club, company, partnership and or an association. This entity structure is mainly suitable for small groups such as volunteer or membership based that are not fully reliant on donations and external funding. The Singapore company incorporation of Societies is done with the Registrar of Societies also known as “ROS” under the Singapore Societies Act.
Generally, societies are easier, faster and less costly to establish however, unlike public company, they are not deem as a separate legal status hence members are liable for the societies’ liabilities if situation arise. It is also compulsory by Singapore law that a society appoints a President, Secretary and Treasurer who are Singapore citizens and or permanent residents.
Every year, the society must conduct audit on its account and the annual returns are to be filed annually without fail with ROS. The society must produce also a constitution that governs the society’s operations and activities.
Tax exemptions for Society
Similarly to Public companies, Societies are exempted from income tax provided that the surplus funds are from members or 50% of its gross taxable receipts are from its members and are non tax-deductible for the members. And to be fully exempted from tax, the society will have to apply for full Charity status.
Introduction to Charitable Trust
A Charitable Trust primarily support and promotes a purpose and is not setup to benefit specific individuals. It can be described as an arrangement written in a trust deed which is hand over to the trustees by the owner or founder. The trustees are responsible for administering the funds or assets for the benefit of the beneficiaries for the objective that the Trust supports. Example of Charitable Trust can be scholarships and bursaries.
When setting up a local company in Singapore, note that this entity structure requires a board of trustees.
In addition, a trust deed that serves as the framework for the activities of the appointed trustees is required.
Alike society, Charitable Trust does not have a separate legal identify and the trustees are liable for the liabilities that arises from its activities. It can be incorporated by anyone who wishes to commit part of their assets for charitable purposes with proper legislations.
However, it is not a suitable entity structure if the activities and operations of the trust can lead to a significant increase in liabilities.
It will only be useful if the trustees were mainly to hold and invest funds or assets and to disburse the income from the relevant funds.
Charitable Trusts are licensed by the Monetary Authority of Singapore (MAS) and are governed by the Singapore Trust Companies Act.
Tax exemptions for Charitable Trust
After the registration of the Trust with MAS, it can apply for charity status.
Interested to find out more?
Looking to start a non-profit? For more information to setting up a local company in Singapore, contact our company incorporation consultants at +65 6493 2970.