Difference between Company Limited by Guarantee and Limited Liability Company

Difference between Company Limited by Guarantee and Limited Liability Company

Singapore’s legal landscape gives rise to the establishment of a wide variety of legal entities and business structures that caters to the diverse needs of entrepreneurs. When making a decision of company incorporation in Singapore, one of the most important factors to consider is the type of business structure that you choose for your business. It can impact your tax payments, personal liability, ability to borrow money, image and perception of your business among your clients and suppliers, amount of paperwork your business is required to do, compliance responsibilities and ease of doing business.

Therefore, it is important to understand the different business structures well so as to make a wise choice. In this article, we will understand the difference between the two most popular types of business structures namely, Company Limited by Guarantee and Limited Liability Company.

What is company limited by guarantee?

A company limited by guarantee is a type of business entity incorporated for non-profit purposes or for the public good. It includes societies, clubs, trade associations, charitable and religious bodies, community projects and other similar organisations. Instead of distributing the profits to their members, these companies retain the profit or utilise them for some relevant purpose.

In the case of a company limited by guarantee, the liability of members is restricted to their asset contribution in the company. In addition, the amount of guarantee by the members is mentioned in the Memorandum of Association.

Reasons to Set Up a Company Limited by Guarantee
  • A company limited by guarantee protects its members from any personal liability for the debts or losses that may be incurred by the company
  • Moreover, they are considered more trustworthy and legitimate in comparison to other unincorporated businesses. People view them as a reliable and credible establishment
  • Funding bodies and local authorities prefer to collaborate with organisations registered as company limited by guarantee
The Bottom Line

The choice of your business structure should suit your company’s present and future needs. You may take the advice from a professional company who can guide you on the ideal business structure looking at the comprehensive perspective of your business.

At IMC Group, we help our clients choose the ideal business structure which helps them meet their goals. When you hire us you don’t have to worry about how to register a company in Singapore. We take care of everything right from deciding the business structure to completing all the registration and compliance requirements. So, get in touch with us today!

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