SUITABLE BUSINESS VEHICLE FOR STARTUPS IN SINGAPORE

Are you a budding entrepreneur looking to start your business in Singapore, and wondering which option best suits your company? Then look no further. This article is targeted at helping you learn three vital things.

First, you should know that choosing to start your business in Singapore is the best decision ever. Singapore is really a good place to introduce what you have to the world. Secondly, you will be learning about the various options you’re privy to when starting your business in Singapore. And lastly, you get to compare these various options in this article. This way, you can make an informed decision on setting up the right structure for your business.

THE BEST PLACE TO INTRODUCE YOUR BUSINESS TO THE WORLD IS SINGAPORE

It’s not uncommon to hear business owners complain about the hectic journey Singapore policies subjected them to when registering for their company. This, and the fact that the timeline differs across the world, creating some pulls here and there. Then there are the strict laws of Singapore to follow through, as there is hardly room for slip-ups. All these make it look almost impossible. Still, they forge ahead with the procedure, didn’t they? Now, ask if it has been worth all the drama and they’ll give you a bright smile because it’s been worth every sweat shed, and more.

THINGS TO CONSIDER BEFORE CHOOSING THE BEST BUSINESS VEHICLE FOR YOUR BUSINESS

When starting your business, it is very crucial to have all your facts right. Some factors must be considered first, before knowing which of these vehicles would be a great fit for what you have in mind. These factors are;

Capital: Do you have enough capital to start your company? Or do you need help in form of collateral, loans, or a beneficial partnership? While most prefer running the business themselves, sometimes, having someone you can sit with and deliberate on the progress of your company might be a key reason why others don’t go at it alone. After all, two heads are often always better than one.

Members: while you may have decided you want other people joining your company, you might want to plan just how many members you are willing to take on. Some partnerships involve just you, and another. Some however requires you to take on a whole corporate body, or even taking 20 or more members depending on the type of partnership you want to go into.

Liabilities and risks: while every business owner prays to have a smooth ride, and not run into loss or debts, it’s not always a great ride. There will be lots of bumpy roads along the entrepreneurship path. This is another key factor to consider. Before starting out, ask yourself just much loss, and debts are you willing to take on for the business? And again, what risk are you willing to take as a business owner. The risk might involve bringing in a total stranger into your business. Would you take that risk? Can you trust these persons? If not, what other alternatives are there? Thoroughly think these through before making your choice.

Business Goals: most times, the most important factor is the goals you have for wanting to start that business. Some businesses could do well if partnerships are allowed due to the different skill set each brings to the table while others need the speed and agility to pivot fast. If your business is a one-man business that could survive the heat alone, then let it be. Three is a crowd anyway.

Having clarified these factors, we can then proceed to the next stage, which is;

AVAILABLE BUSINESS STRUCTURES IN SINGAPORE

As a business owner looking for the best option for your company in Singapore, there are viable decisions to make before setting up your business. You may want to consider, who joins your team (Partnerships), or if you are financially capable enough to run your business alone, (Sole Proprietorship). Based on this singular decision, the major available business vehicles include running your business solely, also known as Sole Proprietorship; or having people involved in your business for financial support or otherwise, also known as Partnership.

If you have crossed that bridge, that is you have decided your venture would be run single-handedly by you, or that you are bringing in more hands, then you are ready for the next big decision: which vehicle best suits your company. For ease, here are the four major business vehicles available for your business thriving perfectly in Singapore:

• SOLE PROPRIETORSHIP

This type of business vehicle involves just you. There’s no drama involved, no looking for any more before making intricate business decisions. It’s just you, and you alone doing the thinking and dropping the money. This makes this business vehicle probably the best option as you are not saddled with anyone and can make quick choices without being held back by your partner; if you so choose to have one. However, the limitation to sole proprietorship, other than the fact that usually you alone fund the business, is the unlimited liability you could be exposed to. For ease, Singapore policy allows individuals above 18years to be sole owners of their businesses. Other factors considered include residency permits, citizenship certificates, and eligible FIN holders.

PROS

• It’s easy to set up
• Decisions are made quickly
• No drama is involved
• Usually attracts a lower tax obligations based on personal income tax rate if volume is low

CONS

• All the decisions are made by an individual.
• There’s nobody to keep the proprietor in check.
• It can be capital exhausting for the sole owner
• Unlimited liability exposure
• Not a separate entity from the individual (business owner)

• PARTNERSHIPS

Partnership means having more than one person running a company. At least, two or more people are involved in the company’s functionality. These partners are responsible for whatever happens to the company. When picking a partner for your business, they key is that your partner is someone you trsust. In Singapore, two types of partnerships are recognized;

• LIMITED PARTNERSHIP

A limited partnership business vehicle, like all partnerships, requires not less than two participants going into business together. It should be noted that for a limited partnership, more than two participants could be involved. But there should be one general partner who stands as the one to be held responsible for the company’s success and fails. He or she is the one to go to when the company faces any debts, loss, complaints or whatsoever. This post is majorly reserved for the person who started the company himself. The other partner is known as a limited partner. This partner has a restricted impact on the company. He/she isn’t held responsible for anything in the company unless stated otherwise, as agreed by both partners in their contract. The role of the limited partner however cannot be undermined as Singapore wouldn’t approve your company if the limited partner isn’t available.

PROS

• It has no separate legal entity from the partners
• It cannot sue or be sued or own property in its own name
• The general partner holds the limited partner accountable
• A limited partner is not responsible for the company’s loss outside his investment

CONS

• Losses can be incurred due to their carelessness
• Cease to exists if any of the individual pulls out of the partnreship

• LIMITED LIABILITY PARTNERSHIP

A limited liability partnership is not just an individual but an entity by itself. This means that legally, you cannot be held responsible for any debts or losses incurred by your business unless there are any wilful act or fraudulent intention observed. This type of partnership is best for professionals such as Accountants, Consultants, Doctors, Lawyers…

PROS

• The limited liability partnership is seen as a separate legal entity outside the partnership
• Partners are not liable for losses or debts incurred by the other
• Changes in partnership do not affect its existence, giving room for succession privilege

CONS

• Limited ability to scale
• There must be one manager residing in Singapore

• COMPANY

This is a business organized in such a way that the shareholders and directors are separated, and exempted from its legal dealings. It could be a private company with about 20 members or more. And it could also be a public company having over 50 members. The members of the company; both private and public have limited liability. They can be sued by the company, and can also sue the company. The members also have the right to own properties in the company’s name.

PROS

• Members are not responsible for the company’s loss or debts
• Members have limited liability
• Most appropriate setup to scale and grow

CONS

• Usually entails a higher compliance costs compared to the other type of setup
• Tax is levied based on corporate tax rate which may be higher than the other setup if the business volume is low

FACTORS TO CONSIDER BEFORE MAKING YOUR CHOICE

Now, you must be ready to make your pick from these tools aimed at jump-starting your business, but hey, chill a bit. Before deciding which business vehicle best suits your business, here are few factors to think about.

Ease of set up

Just how easy are these vehicles? Sole Proprietorship allows for ease of set-up. Because decisions are made by an individual, there’s almost no delay, unless as the business owner you have doubts about what you want to do.

Continuity

The singular disadvantage of a sole proprietorship is how the death or loss of the owner becomes the end of the business itself. Hence, what is the continuity plan for your business and where partners are involved, are you certain that they would stay with the business all the way?

Business Limitations

Limited liability setup such as that of a company structure are there to shield partners from unlimited losses. This means that when the company runs a loss, or incurs debts, the partners are not directly affected aside their initial investments. The shareholders’ losses are limited to the money invested in the company. The sole proprietor however does not have this advantage. So, as the company runs into financial issues, he is affected also, and might end up losing all he owns; including personal assets.

General Reception

The opinion of the general public about your business choices cannot be over-emphasized as the public are your clients really. Plus, customers they say are always right. The public tends to favour a business having a corporate body as its counterparty. It portrays strength, continuity, and even trust. This endears the business more to the general public. While a limited partnership with a good partner can get you a sizable number of public interest, having a strong corporate body as a partner will skyrocket your company. A sole proprietor on the other hand may have a difficult time getting the people’s interest in his company. Unless this owner already has a strong image out there already, the public would hardly pay attention to his company

Financial status

Lastly, a key factor you might want to consider when picking the best vehicle for your business is funding. While the costs of operating via a sole proprietorship and partnership structure is cheaper on the onset, it typically faced an uphill to near impossible tasks when it comes to raising funds outside the business owners’ own circles like family, friends, and relatives.

People see him as the sole owner, and may not give their trust readily like they would if they were dealing with a corporate entity. This also extend to the issue of accessibility of business loans from banks.

Conclusively, the survival of every company lies in the decisions made, and the person making these decisions. As a business owner looking to establish your branch or start your company from the scratch in Singapore, these business vehicles are to help propel your company and get it the right tools it needs to thrive.

While it’s okay to want to run your company alone, sometimes involving others might be the secret ingredient that pushes your company to the top. But whatever you decide, remember this is your business, and you choose what is best for you, and your company.

Tempted to start your own business? Reach out to our corporate secretarial services at Oohrar today and we’ll make sure you have the relevant information to make an informed decision that affects your business growth trajectory!