We thought we’d give you the flip side. While understanding the benefits of a private limited company in Singapore, it’s also essential for you to understand the risks you could be exposing your company to.
Singapore is a haven for entrepreneurs, and for good reason. Setting up a PLC offers a vast amount of benefits that only one could dream of, such as tax benefits, access to funding and maximising your profits. However, it’s naive to go in head first. When starting with your own Pte. Ltd., it’s easy to get caught up on all the attractive benefits but you must consider all factors, including those that may be of threat.
This blog delves into the flip side of Pte. Ltd. companies in Singapore, exploiting some hidden risks that entrepreneurs might not initially consider.
Limited Companies Aren’t Always Protected
Limited liability is often touted as a major advantage. Shareholders’ personal assets are generally protected from any business debts that might occur but that is not always how it goes and most definitely isn’t set in stone. Some shareholders have had to find out the hard way for things such as:
Personal Guarantee
if a shareholder provides a personal guarantee for any loan they give, then they are solely financially responsible, so if there is a loss, it all goes down to them.
Negligence and Misconduct
Directors’ actions can pierce the corporate veil and there is no 100% guarantee that things such as embezzlement, fraud and negligence can’t happen without knowing until it’s too late. This can put personal shareholders’ personal assets at risk and lead to a downward spiral.
It might be a good idea to have a backup insurance policy, whether it’s being in contact with investment fraud lawyers such as WRS or taking out any shareholder insurance policies you feel suit your needs.
Compliance & Regulatory Burdens
Singapore boasts a robust regulatory environment. While this fosters a secure business climate, private companies must navigate through a wide range of compliance requirements, which can be time-consuming but still more than necessary.
Taxation
Being on top of any changes within taxation and adhering to them immediately is crucial. If ignored and no research is done, this could result in penalties for tax non-compliance that are significant and just not worth the risk.
There are many ongoing obligations that need to be fulfilled so extensive research and planning these things into your day-to-day are essential to removing any risk of non-compliance.
Maintaining Good Corporate Governance
Strong corporate governance is essential to any business type, which means private companies are no exception. Which involves:
Clean Lines of Authority
Having a well-defined and effective organisational structure with roles and responsibilities clearly assigned can minimise confusion and any conflict between shareholders and staff. This also makes it easier for reporting to go up the ladder on much less significant queries to be dealt with and not distract the big dogs from their day-to-day.
Financial Transparency
Accurate and up-to-date financial information is essential for informed decision-making and attracting investors. This can be time-consuming for the directors; therefore, hiring a reliable individual to handle these accounting roles is essential and cost-effective in the long term.
Final Thoughts
Understanding the potential risks associated with Pte. Ltd. companies empowers you to make informed decisions. While these risks shouldn’t deter you from pursuing your entrepreneurial dream, it’s wise to approach it from a well-rounded perspective. Consulting with a lawyer and accountant can help you navigate the legal and financial aspects of running a private limited business in Singapore, mitigating any risks and setting your business up for long-term success so you can then reap all the rewards and benefits.
