Why Corporate structure is a preferred form of business?
Updated: Jan 11, 2021
Based on the Accounting and Corporate Regulatory Authority (ACRA), Singapore has more than 400,000 registered companies. Considering the population of about 5.8 million, this is a substantial number. Do you wonder why it is so?
There are many reasons why corporate structure is widely popular compared to the other forms of legal options.
The essential inherent features of the corporate structure, which are provided by legislators, are:
Separate legal personality: The Company is a distinct legal entity, separate from the owner(s). It allows the Company to enter any legal contract on its own.
Limited liability: The owners are responsible only to the extent of their shareholding in the Company. Nothing more than that.
Unlimited owners: The shareholding structure of equity funding is unique to the Company, allowing it to have as many owners/members/shareholders as possible. However, a private company can have a maximum of 50 shareholders.
These features of a company are distinguishing for expanding the business unlimitedly. The benefits which can are corollary from the above features are:
Call in external investors: Ownership is not limited to a handful of people. When and where required Company can call in for external investors as equity partners.
Management is distinct from ownership: The group of individuals called Directors control the direction of the Company. Together they form a Board of Directors and are responsible for the day-to-day operations.
Perpetual existence: Its owner’s existence does not bind the Company. Due to its separate legal presence, even though shareholders may cease, the Company goes on forever.
Corporate veil: Company is responsible for its deeds. Connection to ownership is limited. The shareholders will not be held accountable for the Company’s actions.
To sum-up, Corporate structure provides you substantial risk protection and growth potential.
Singapore, a global economy, has a colossal attraction for its pro-business governance, quality human capital, transparent policies, financial assistance, regional reach, and honest reputation. All these features entice global enterprises and entrepreneurs to build their base in the country. For them, the incorporation of a Company is the best form to establish their business, as for this, they do not need to move their base.
But, how do the global companies structure their business from Singapore?
Follow the next segment in the series.