Speacial Case Of Incorporated Business Flashcards
List the 5 advantages of Incorporate Company.
Limited liability More sources of funds Specialized management skills Transferability of ownership Perpetual life
List the 3 disadvantages of incorporated company
More government regulations
Lack of secrecy
Higher taxtation
Discuss more government regulation
More government regulation - A company has to comply with more government regulations. A company is required to keep proper accounting records and file financial statements in its annual returns to Accounting & Corporate Regulatory Authority. It is also governed by the Singapore Companies Act.
#Comply with more government regulations. #A company is required to keep proper account records and file financial statements in its annual records to the ACRA.
Discuss lack of secrecy
Disclose important financial figures and other relevant information in its annual report.
Lack of Secrecy - For the benefits of its shareholders and potential investors, a company required to disclose important financial figures and other relevant information in its annual report. Such information is regularly used by competitors.
Discuss higher taxtation.
Sg company tax rate is flat 17%.
Higher taxation - Singapore’s corporate rate is a flat 17%. This rate is subject to changing economic conditions. More an individual who personal tax bracket is less than this, it is better to operate on a sole proprietorship or partnership basis where the tax rate is progressive.
Discuss limited liability
Limited liability - the single most important advantage of incorporated companies is the limited liability, this feature guarantees that individual shareholder are liable up to the amount of capital they have invested in the company. If a company is bankrupt, it will pay all debts from its remaining assets. If it is insufficient, the shareholders need not use their personal assets to settle the debts except where they provide personal guarantees for company loans.
#Individual shareholders are liable up to the amount of capital they invested in the company. #A company is bankrupt, it will pay all it's debts from its remaining assets. #If it is insufficient, the shareholders need not use their personal assets to settle the debts. ###
Discuss more sources of funds
More sources of funds - As the number of shareholders increases, so does the amount of capital. A private limited company can solicit funds from up to fifty members while a public limited company can invite the general public to subscribe to its shares.
#2->no limit #As the no. of shareholders increase, so does the amount capital. #Private LTD co, solicit funds from up to 2-50members. #Public LTD co, company can invite the general public to subscribe it's shares.
Discuss Specialise management skills.
Employ better qualified people.
Specialized management skills - Big companies are normally divided into departments or divisions each of which is headed by a manager, such as marketing, production, finance and personnel, These professionals are experts in their own areas. Big companies can afford to employ better qualified people and have a larger pool of human resources to choose from.
Discuss transferability of ownership.
Transferability of ownership -
Public ltd co.
#Shares or ownership in co transferred quite easily.
#Shares listed in Singapore Exchange, readily bought and sold in the open market.
#SH thus maintain their liquidity and can dispose of the shares when they need cash.
Pte ltd co -
#Shares transfer not easy, can be subject to the conditions in the Articles of Association,
@{Lawyer/soliciter; doc. prepare to form biz 6-8 doc.}
#Req consent of majority; other shs b4 shares can be transferred.
#This allows existing shs to retain control of the company.
Discuss perpetual life
A company can carry on business indefinitely.
Perpetual Life - if the business is well managed, company can carry on business indefinitely. The death or withdrawal of any shareholders does not affect the existence of the company because, legally, the business is a different entity (person) from the owners.
