A company limited by guarantee (CLG) sounds attractive with the accompanying benefits of having limited liabilities and tax benefits. However, the CLG structure is not for everyone, especially not for for-profit organisations. The CLG structure is for companies that perform non-profit making activities registered with the Accounting and Regulatory Authority of Singapore (ACRA).
Benefits of incorporating as a CLG
1. Limited liability
Incorporation as a CLG makes the company a separate legal entity that is distinct from its members. The company can own a property in its name, sue and be sued in its name, enter in contracts, assets of the company are separate from its members, and shareholders of the company will not be liable for acts of the company.
2. Tax benefits
CLGs have to comply with the Singapore corporate tax rate of 17% and can claim tax deductions. However, CLGs that have obtained charity status will be tax-exempt. A Summary of Singapore’s Corporate Tax System will provide more details on the system and tax schemes available.
However, if a CLG has obtained charity status, it will be tax-exempt.
Incorporating a CLG
It is advisable to seek professional assistance in registering a CLG with ACRA in compliance with the Singapore Companies Act.
1. Cost of incorporation
Reservation of company name and registration of CLG is made online via BizFile+, costing $15 and $300, respectively. After you pay the registration fee, it will usually take 15 minutes for a company to be incorporated. For more information on the dos and don’ts and guide to having your company name approved, read An Exclusive Guide: Incorporation of Companies in Singapore.
2. Legal requirements and procedures
Applicants must submit their company’s constitution to ACRA via BizFile+, which include the following details:
- Company name
- Number of members
- The dollar value individual members have guaranteed to pay in the event of winding up
- A statement that the liability of members is limited; and
- At least 3 persons acting as trustees with 2 Singapore citizens or permanent residents
At the time of registration with ACRA, CLGs may be required to apply for licences. CLGs may apply for licences via GoBusiness.
Applicants must also appoint an auditor within 3 months of incorporation and select a company secretary within 6 months of incorporation. Other statutory requirements to comply with include:
- Holding annual general meetings and conducting yearly audits
- Filing annual returns with ACRA 7 months after the financial year-end
- Filing tax returns every 15th December; and
- Complying with the public disclosure obligations and statutory regulations imposed by the Singapore government
If a company’s annual taxable supplies surpass $1 million, the company must register for GST.
Applying for charity status
Charity status allows a CLG to be income tax-exempted. The criteria stipulated by the Commissioner of Charities have to be met to apply for charity status. Notably, the activities undertaken by the company must be charitable and targeted towards helping the needy.
Application for charity status must be made to the Commissioner of Charities within 3 months of CLG establishment via the Charity Portal.
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