Epica Learn Series

The Pros and Cons : Shareholding in Personal Name Vs Corporate Shareholding

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Should I Incorporate a Subsidiary or take Shares in my Own Name [Singapore Incorporation]

Your chosen business structure will dictate the path of your proposed company in Singapore—from its daily operations, to tax commitments, and even your personal assets that will be put at risk. As a business owner, you have two options when it comes to registering your company in Singapore: take its shareholding in your personal name or in the name your existing company’s name instead. This instance deals with:

Your individual capacity by taking the shareholding of the proposed company, becoming its owner, and, subscribing to its 100% shares; versus
Creating a subsidiary by taking the shareholding of the proposed company in your existing company’s name.

We will explain you what to do in this situation and allow you to choose the business structure that has the perfect balance of benefits and lawful protection.

The Pros and Cons of Subsidiary and personal Shareholding: Their Implications

If an existing company takes the shareholding of the proposed company, then the parent company’s compliance requirements would apply in this case as well. This means that your existing company will become the owner of your proposed company. The proposed company’s results, which are the profit and loss account, will then need to be consolidated and reported to the parent company. Undoubtedly, these would add extra work to your accountant. The structure in this case appears as indicated below.

There exists a Singapore company owned by a parent company, which can be either located in Singapore or in a foreign country.
If your parent company is subjected to an audit, then your Singapore company will be also subjected to an audit, and an audit will be definitely costly.
If a parent company is, for example, in India, then the consolidated profits of both companies must be reported to the tax authorities of India. You also have to pay taxes for the consolidated profits.
If Singapore has a double taxation avoidance (DTA) agreement with your country, then you will definitely gain some benefits. However, the amount of tax rebates that you can acquire depends on the DTA provisions. Additionally, when a corporate company takes the shareholding of a Singapore company, it will no longer become an exempt private limited company.

Pros and Cons of Subsidiary - Private limited company

What Is an Exempt Private Limited Company?

An exempt private limited company only has less than 20 shareholders, who are all individuals, and does not involve a single corporate entity. If a corporate entity is taking the shareholding of a company, then it will become a private limited company.

Pros and Cons of Subsidiary - Diffrent between private company

How Does an Exempt Private Limited Company Differ from a Private Limited Company?

Filing of accounts to ACRA and XBRL filing are required from a private limited company with a corporate shareholding, while they are only optional for an exempt private limited company.
Audit is not required (in some conditions) from a private limited company with a corporate shareholding and an exempt private limited company.
In most cases, the audit may be needed if the parent company is subjected to an audit even if the previously mentioned documents are not required from both business structures.

The Pros and Cons of Subsidiary and Shareholding: What to Prioritize

Pros and Cons of Subsidiary - Prioritize

If you are flexible enough and have the choice, then you must prioritize registering an exempt private limited company as this business structure remains separated from your already existing company in your home country or from your other company. Moreover, its registration process only asks for minimal compliance requirements. Obviously if there is no option, then you will go for a corporate shareholding.

To conclude, taking up shareholding in an individual’s name is the most convenient and beneficial way of registering a company in Singapore.

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