In Singapore, a non-profit entity is one that does not distribute its surplus revenue among its members. A traditional profit-driven entity would seek to maximise profits so that this profits can be distributed among its members. A non-profit entity’s purpose is to serve public interest and benefits. A non-profit entity needs to be set up just like a traditional entity. There are a few non-profit entity structures which can be set up.
1) Public Company Limited by Guarantee
A public company limited by guarantee (PLG) allows the entity to function as a normal entity. It can enter into contracts with other entities and acquire property to name a few. Unlike a traditional structure which is limited by shares, this structure requires the members to guarantee an amount that will cover any possible liabilities. However, in certain cases, this liability could be as low as $1. To set up this type of company structure, 1 director, 1 member and 1 secretary are needed. A director and the secretary must be a resident of Singapore.
A society is not a separate entity unlike a Public Company Limited by Guarantee. It cannot enter into contracts. It is not an independent entity and thus its members have more liabilities to bear. Ten people are required to form a society. The president, secretary and treasurer need to be residents of Singapore. Societies registered with the Registrar of Societies can enjoy income tax exemption if the surplus comes from its members.
3) Charitable Trust
A charitable trust is set up as an entity by certain individuals. These individuals will set up a deed which acts as a guideline as to how the trust should be run. Trustees are then hired to manage the charitable trust in accordance with the deed. Due to the legal complexities, especially in preparing the deed and administering it, charitable trust structures are expensive to set up.
Once you have set up either of the above structures, you can apply for Institutions of Public Character Status or Charity Status.
A) Institutions of Public Character (IPC) Status
Non-profit entities can apply for this if the organisation is working towards the upliftment of Singapore as a whole. Donations to the organisation are tax deductible which makes fund raising easier as a whole.
B) Charity Status
In order to apply for this status, the activities of the organisation must be geared towards the assistance of the poor and needy of society. Applying for a Charity Status provides automatic tax exemption. This status allows the organisation to receive donations from charitable trusts. In exchange, the organisation needs to follow strict guidelines like making fund raising activities more transparent and making information about the organisation online for public purview.
In conclusion, if you are looking to function as a non-profit organisation, you should be looking to structure the organisation in accordance to one of the above structures. This allows your organisation to function efficiently.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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