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Starting A Business
Sole-Proprietorship.
Advantages of a Sole-Proprietorship
- The simplest of all new businesses or company start ups – quick to establish and requires only a small registration fee.
- Minimum capital required – Dependent on the nature of the business
- Freedom in management decisions
- No filing of annual return except personal tax returns with the Inland Revenue Dept(IRAS)
- To prepare certified accounts if the turnover of the company exceeds S$500,000
- No requirement to appoint an auditor or corporate secretary
Disadvantages of a Sole-Proprietorship
- Unlimited liability for a Sole-Proprietorship. Personally liable for debts incurred by his business and will have to sell his personal assets(Eg. Car, house, etc.) to repay the outstanding debts.
- Sole proprietors are personally liable for all wrong doings done in the capacity of the business.
- Limited borrowing powers. Banks would not normally grant loans or facilities to small businesses unless the borrower has assets to serve as security.
Partnership.
Advantages of a Partnership
- Combined resources, expertise & experiences of more than 1 person
- Mutual trust & inspiration with sharing of work load
- The Partnership firm is not tax assessable - profits are taxed only in the hands of the partners as individuals
- No auditing required on the accounts - benefits of costs savings
Disadvantages of a Partnership
- Similar to a Sole-Proprietor - each partner is personally liable for all the debts incurred by the Partnership. Even after your departure from the firm, you will still be held liable for any debts incurred before your resignation.
- Subject to any special agreement between the partners, the partnership is dissolved upon the bankruptcy or death of any one partner. In addition, admission of any new partners and change in nature of business require the consent of all partners.
- Similarly, a partner cannot transfer his interest in the partnership unless the other partners have given their consent.
- Each partner has implied power to bind the other partners in a contract as he is acting as an agent of the business.
- Maximum number of partners restricted to a maximum of 20
Limited Liability Partnership (LLP).
An LLP is a new vehicle for doing business in Singapore.
The LLP Act will commence on 11 April 2005.
The LLP will give the owners the flexibility of operating as a partnership whilst giving them limited liability. It combines the benefits of a partnership with those of private limited companies. However this comes with safeguards in law to minimize abuse and provide protection to parties who deal with the LLP.
The LLP is a body corporate and has a legal personality separate from its partners. The LLP has perpetual succession. Any change in the partners of a LLP shall not affect its existence, rights or liabilities.
An LLP is capable of:
- Suing and being sued in its name;
- Acquiring and holding property in its name;
- Having a common seal in its name; and
- Doing such other acts and things in its name, as bodies corporate may lawfully do and suffer.
The partners of the LLP will not be held personally liable for any business debts incurred by the LLP.
However a partner may be held personally liable for claims from losses resulting from his own wrongful act or omission. But a partner shall not be personally liable for such wrongful acts or omissions of any other partner of the LLP.
An LLP is required to keep such accounting and other records that will sufficiently explain the transactions and financial position of the LLP. This will enable profit and loss accounts and balance sheets to be prepared to give a true and fair view of the state of affairs of the LLP. If the LLP does not do so, the LLP and every partner shall be guilty of an offence. The punishment may be a fine or imprisonment, or both. In addition, the LLP shall submit to the Registrar an annual declaration of solvency or insolvency. Such solvency status reported shall be available to the public.
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