When starting a business in Singapore, one of the first and most critical decisions you’ll make is choosing a business structure. From sole proprietorships and partnerships to companies, each structure has its implications for liability, taxation, and growth potential.

However, in this article, we’ll be focusing on private limited companies or Pte Ltd. Interestingly, it is considered to be one of the most popular business entities in Singapore. But what makes it such a preferred choice?

Let’s find out below.

What is a Private Limited Company?

A private limited company (Pte Ltd) is a type of limited liability company (LLC) that is registered with the Accounting and Corporate Regulatory Authority (ACRA). This structure forms a separate legal entity from its owners, providing a formal and regulated framework for business operations.

To be incorporated, it requires at least one shareholder, one locally resident director, and one company secretary. Moreover, the company’s shares are privately held, meaning they are not available to the general public and are typically owned by a small group of individuals or entities.

Advantages of Running Your Business as a Private Limited Company

Let’s break down the core features that make a private limited company a strategic option.

1. A Private Limited Company Has Its Own Legal Identity

One of the defining features of a private limited company is that it exists as a separate legal entity from its shareholders and directors. This means that the company is recognised by law as its own “person”—independent from the individuals who own or manage it.

Because of this legal separation, a private limited company can enter into contracts, own property, open bank accounts, and even face legal action in its own name. This legal recognition allows the company to interact with external parties and fulfil obligations as a business in its own right.

Understanding this separate legal identity is essential when deciding on a business structure, as it shapes how responsibilities, ownership, and risks are managed within the company.

2. Minimises Personal Financial Risk and Liability

In a private limited company, the financial liability of each shareholder is limited to the value of their shares in the business. This means that if the company faces financial challenges or legal claims, shareholders are only responsible for the unpaid portion of their shares—nothing more. Their personal savings, property, or other assets remain protected and are not used to cover company debts.

This structure contrasts sole proprietorships and partnerships, where the business and the owner are legally considered the same. In such cases, if the business accumulates debt or is sued, the owner’s personal assets can be seized to settle those obligations.

By separating personal wealth from business responsibilities, the private limited structure offers a vital layer of protection. This limited liability is among the key reasons why many entrepreneurs register their business as Pte Ltd in Singapore. It provides a more secure foundation for growth, as stakeholders can invest and operate without the fear of losing personal assets due to business issues.

3. Greater Opportunities for Raising Capital

Another significant advantage of a private limited company is its potential to raise capital through the issuance of shares. This allows the company to bring in external investors—such as venture capitalists, angel investors, or even family offices—by offering them equity in exchange for funding.

Since ownership in a Pte Ltd is structured around shares, it becomes easier to formalise investment agreements, allocate profit rights, and establish clear terms for returns.

In contrast, sole proprietors and partnerships often face limited funding options. They typically rely on personal savings, loans, or contributions from business partners. While these sources may suffice in the early stages, they can become restrictive as the business grows and require more significant capital for expansion, product development, or market entry.

Having access to external funding opens up real opportunities for growth. It allows a private limited company to scale faster, hire talent, invest in infrastructure, or expand into new markets without putting all the financial burden on the owners.

4. Attractive Tax Benefits and Exemptions

Taxes significantly impact how much a business keeps in profit—so understanding the tax structure of your chosen business entity is essential. In Singapore, Pte Ltds are taxed at a flat corporate tax rate of 17% on their chargeable income.

But, the good news is that newly incorporated private limited companies that meet certain conditions may qualify for the Start-up Tax Exemption (SUTE) scheme.

Under this scheme, Pte Ltds can enjoy a 75% tax exemption on their initial S$100,000 of taxable income, followed by a 50% exemption on the next S$200,000 for each of their first three consecutive years. These savings can ease early-stage financial pressure and give startups more flexibility to reinvest in growth.

In comparison, sole proprietorships and partnerships are taxed based on personal income tax rates, which can go as high as 24%. As a result, business owners under these structures may end up paying more tax on the same income than they would under a Pte Ltd in Singapore.

Singapore’s one-tier tax system also makes the tax framework more appealing. Under this system, profits are taxed at the corporate level only. When a Pte Ltd distributes dividends to its shareholders, those payouts are not taxed again, meaning shareholders receive their dividends tax-free. This simplifies profit distribution and makes reinvestment or returns more rewarding for business owners and investors alike.

5. Ease of Ownership Transfer and Business Continuity

Lastly, a private limited company offers flexibility when it comes to changes in ownership. Shares can be transferred, fully or in part, without interrupting business operations. This makes it easier to onboard new stakeholders or restructure ownership as the company evolves.

Suppose a shareholder decides to exit the company, whether due to differences or a change in direction; they can do so by selling their shares. This process keeps the business stable while opening the door to new investors or collaborators.

Rather than disrupting operations, it can serve as an opportunity to bring in new perspectives and capital, keeping the company agile and growth-ready.

Choose a Smarter Path to Business Success

Given these advantages, choosing a private limited company is a strategic option for entrepreneurs seeking liability protection, tax efficiency, funding flexibility, and long-term stability. If you’re considering this path, Segovia can help.

Our company incorporation services in Singapore are designed to simplify the setup process and ensure your business is structured for success. Beyond incorporation, our corporate secretarial services support your ongoing compliance and day-to-day governance—so you can focus on growth while we handle the details.

However, if you’re still exploring your options, we recommend checking out our comparison of the different types of business structures in Singapore to help you decide which setup best aligns with your goals and operational needs.