Shareholder's salary

[yoongf]

Auditors have their IFRS accounting standards to follow. If your auditors feel the numbers are reasonable then no issue.

IRAS has God-level surveillance system in place. If your books deviate so far away from industry norms, it will be further scrutinised.

All you need is 1 letter from IRAS and its like opening the can of worms. There are industry standards.. just be aware what is reasonable.

Best to use IRAS Auto Inclusion Scheme to avoid any issues. Not all directors fees are diligently reported to IRAS at the personal income tax level.

If the company writes it off as an expense, the person they're paying gets taxed instead — either as self-employed (director fees) or salary.

Tax avoidance happens all the time. Why would it be an IRAS issue?

 

[Dividends]

From your pro exp, which model is more ideal? Take money out thru salary or dividends?

I know that salary is fixed based on employment contract and there's CPF component to it while dividend doesn't have those strings attached.

As a small business owner, I prefer the salary plus bonus model to take advantage of the additional tax deductions I can get from CPF (however little). And also to have a sum of money for future contingency purposes, which is also protected from creditor claims in the event of bankruptcy.

 

[Value.Matrix]

As a small business owner, I prefer the salary plus bonus model to take advantage of the additional tax deductions I can get from CPF (however little). And also to have a sum of money for future contingency purposes, which is also protected from creditor claims in the event of bankruptcy.

If you did directors fee, you can also lah... just that you self-contribute instead of forced savings. Some like this idea instead.

 

[Dividends]

If you did directors fee, you can also lah... just that you self-contribute instead of forced savings. Some like this idea instead.

Aren't tax savings only available to self-employed voluntary contributions? Do I still qualify for VC tax deductions if I'm the managing director of a Pte Ltd company?

 

[Dividends]

https://www.iras.gov.sg/irashome/Bu...e-basics/Am-I-an-Employee-or-a-Self-Employed/

MD in name or MD in equity/liability? The latter is considered SEP.

In equity, thanks for the info. Will they automatically include the VC tax relief in my NOA like they do with SA topups? Or do I have to file that separately when I do my tax returns?

 

[yoongf]

IRAS does not consider a conpany director as a " self employed".

Any tax relief for self employed is offset against "nett trade income". If NTI is zero, there is no tax relief. Medisave contribution within the BHS is an exception.

https://www.sgsme.sg/news/one-man-show-directors-say-theyre-losing-out-wage-support-self-employed

 

[Dividends]

IRAS does not consider a conpany director as a " self employed".

Any tax relief for self employed is offset against "nett trade income". If NTI is zero, there is no tax relief. Medisave contribution within the BHS is an exception.

https://www.sgsme.sg/news/one-man-show-directors-say-theyre-losing-out-wage-support-self-employed

That was my initial understanding of SEPs as well, thanks for the clarification.

 

[Pearce]

TS, if this is your level of understanding of business setups, i think is premature to get involved.

If business bad, frens sure blame each other, business good, sure green eye. It is never smooth sailing.
Just remember, u can sack director or employee, but can never sack a shareholder. Everyone sure wants to be a chq signatory to jam each other.
As per yr question, % share of revenue can never directly link to salary distribution. High chance run into cashflow problems becos payments may be delayed but salary n CPF is clockwork GIRO. After setting aside funds for working capital, still need to safeguard funds for corporate tax.

Better if everyone get a comm or fee rather than go straight into a Pte Ltd arrangement.

Yup you are right. It is the first time to incorporate a company with a few friends and we currently don't have much knowledge on this.

The reason we want to go straight into Pte Ltd is because of the liability that we may face in future compare to sole proprietorship.

3 of us intend to setup a company because each of us hold different skillset together thus I wish to know about how each shareholder salary is being setup.

 

[Pearce]

salary tends to be fixed. if it is a percentage of an earning, usually it is called commission.

Director A: I put in the largest amount of money, i should get the biggest share
Director B: I run the company daily, i should get the biggest share.
Director C: I am the one the bring in the sales. i should get the biggest share.
Dork: all 3 directors are lost child.

to me the way to run the company is this

Director B runs the company. he is to be paid 500/mth = 6000/year
Director C brings in sales, he is to be paid commission eg 10% of sales = 1000
revenue = 10k, so profit = 3k,
dividends declared= 2k and 1k is retained profits.
If A share is 50%, B 25% and C 25%, A gets 1k dividend, B get 500 dividend and C get 500 dividend.

total
A gets 1000
B gets 6500
C gets 1500
retain profits get 1000

i think this sounds too complicated for TS. If it is just a hawker stall, then ching chai lah. no need complex accounting

If we proceed the way that you mentioned above, what if for 6 months we never bring $10k revenue on each month but only $1000? How are we going to get the salary if we have set A set $1000 etc?

Would you also mind sharing that do we need to state in black and white and declare how much each of us going to get the salary and if yes, where do we do it at? Lawyer's firm, during when register at acra or others?

 

[little pupsky]

Looks to me as there are way too many knowledge gaps, tbh. Best you hire a corporate secretary, lawyer and perhaps a business consultant to sort these out and have them in black and white. These professionals will know what questions to ask. And you and your co-founders will likely find yourselves having to think through this venture a lot more first before you can answer. But it will save you from a lot of problems in the future.

 

[Value.Matrix]

If we proceed the way that you mentioned above, what if for 6 months we never bring $10k revenue on each month but only $1000? How are we going to get the salary if we have set A set $1000 etc?

Would you also mind sharing that do we need to state in black and white and declare how much each of us going to get the salary and if yes, where do we do it at? Lawyer's firm, during when register at acra or others?

All these can be done through directors resolution. For any agreement, these will also be done at the AGM for a summary of flow.

For salary, too bad lo. You need to either add in more capital for the salary, or do it commission based then, when there's a sale, then there's "salary"

Edit: for corporate sec, you may wish to explore OSOME

 

[testingabc]

Yup you are right. It is the first time to incorporate a company with a few friends and we currently don't have much knowledge on this.

The reason we want to go straight into Pte Ltd is because of the liability that we may face in future compare to sole proprietorship.

3 of us intend to setup a company because each of us hold different skillset together thus I wish to know about how each shareholder salary is being setup.

get a sec first, all local companies must have a sec within 6 mths of incorp, then a lot of things the sec can do

 

[CrashWire]

If we proceed the way that you mentioned above, what if for 6 months we never bring $10k revenue on each month but only $1000? How are we going to get the salary if we have set A set $1000 etc?

Would you also mind sharing that do we need to state in black and white and declare how much each of us going to get the salary and if yes, where do we do it at? Lawyer's firm, during when register at acra or others?

A good corp sec will be able to advise you in all this, sometimes even before they are hired.

 

[little pupsky]

Besides a corp sec, you may need a lawyer to draft up a shareholders agreement too. In the event that one of the shareholders want to exit in the future (when the company is doing well/poorly), how would the sale of the his/her shares be handled? How would you value the shares? The shareholders might want to formalize these things early lest it becomes a he-said-she-said situation in the future.

 

[Pearce]

Besides a corp sec, you may need a lawyer to draft up a shareholders agreement too. In the event that one of the shareholders want to exit in the future (when the company is doing well/poorly), how would the sale of the his/her shares be handled? How would you value the shares? The shareholders might want to formalize these things early lest it becomes a he-said-she-said situation in the future.

I will get corporate secretary after register the business.

 

[Pearce]

Hey all, I am intending to use the form below and can you advise if the bottom part of this post, is what supposed to be inserted?

https://www.acra.gov.sg/docs/defaul...titution-for-pte-ltd-company-(standard-3).pdf

We, the persons whose names and occupations are set out in this Constitution, desire to form a company in pursuance of this Constitution and we each agree to take the number of shares in the capital of the company set out against our respective names.


Name of
Subscribers

Tan Lee Meng (according to nric)
Lee Mei Leng (according to nric)

Occupation of
Subscribers


Director
Director


Number of
Shares Allotted

50%
50%

Class of Shares
Currency


What is class of shares??

 

[testingabc]

Hey all, I am intending to use the form below and can you advise if the bottom part of this post, is what supposed to be inserted?

https://www.acra.gov.sg/docs/defaul...titution-for-pte-ltd-company-(standard-3).pdf

We, the persons whose names and occupations are set out in this Constitution, desire to form a company in pursuance of this Constitution and we each agree to take the number of shares in the capital of the company set out against our respective names.


Name of
Subscribers

Tan Lee Meng (according to nric)
Lee Mei Leng (according to nric)

Occupation of
Subscribers


Director
Director


Number of
Shares Allotted

50%
50%

Class of Shares
Currency


What is class of shares??

Bro, no need insert one leh, if you incorp and choose model constitution. Only need to insert if you choose customized constitution. For model constitution you can choose from time to time and at the time of adoption.
On acra side, at least 1 shareholder. They will ask you company level, what is the number of shares, issued shares and paid up shares. Then shareholder level what is the number of shares, issued shares and paid up shares. If you want easy right, ignore preference and other shares, just do ordinary shares will do

 

[Pearce]

Bro, no need insert one leh, if you incorp and choose model constitution. Only need to insert if you choose customized constitution. For model constitution you can choose from time to time and at the time of adoption.
On acra side, at least 1 shareholder. They will ask you company level, what is the number of shares, issued shares and paid up shares. Then shareholder level what is the number of shares, issued shares and paid up shares. If you want easy right, ignore preference and other shares, just do ordinary shares will do

I was told from a friend's mom that when registering at acra, need to prepare model constitution.

May I check when registering at https://www.bizfile.gov.sg/ngbbizfi...ebcenter/portalapp/pages/BizfileHomepage.jspx, what documents are needed for 2 Directors (Both are Singaporean)?

Cause here mentioned:

Downloads
(A) Model Constitution
A copy of your company’s constitution must be submitted when applying to incorporate your company. If you do not wish to create your own constitution, you may choose to adopt the applicable Model Constitution below.

https://www.acra.gov.sg/how-to-guides/setting-up-a-local-company

 

[testingabc]

I was told from a friend's mom that when registering at acra, need to prepare model constitution.

May I check when registering at https://www.bizfile.gov.sg/ngbbizfi...ebcenter/portalapp/pages/BizfileHomepage.jspx, what documents are needed for 2 Directors (Both are Singaporean)?

Cause here mentioned:

Downloads
(A) Model Constitution
A copy of your company’s constitution must be submitted when applying to incorporate your company. If you do not wish to create your own constitution, you may choose to adopt the applicable Model Constitution below.

https://www.acra.gov.sg/how-to-guides/setting-up-a-local-company

if you using acra model constitution, just select the radio button, no need attach one. after you select that radio button, they will ask you whether you want from time to time or at the time of adoption. only if customized constitution then you need attach. you are doing incorp using your singpass and not get a csp do right ?

 

[Pearce]

if you using acra model constitution, just select the radio button, no need attach one. after you select that radio button, they will ask you whether you want from time to time or at the time of adoption. only if customized constitution then you need attach. you are doing incorp using your singpass and not get a csp do right ?

ya, doing ownself and not getting csp to do so to gain experience. So do you mean for model constitution, we can submit after registering at acra?