Business Structures in Singapore: Sole Proprietorship & Partnerships

What is the minimum age for a person to register a business? 18 years. How do you register? The applicant must log in using their NRIC No. & SingPass into BizFile+. (ACRA’s online filing system). If the applicant does...

What is the minimum age for a person to register a business? 18 years. How do you register? The applicant must log in using their NRIC No. & SingPass into BizFile+. (ACRA’s online filing system). If the applicant does not have SingPass, the Applicant has to engage the services of a registered filing agent (lawyer, accountant or corporate secretarial service). Other requirements: the applicant must reside in Singapore and have Medisave "Paid-Up" account with CPF. Who must register their business? Anyone who intends to run a business. Exception: those running a business under their own full name/names as per their NRIC, e.g doctors, lawyers and other professionals who practice their profession as a business (Business Names Registration Act 2014). Effects of non-registration: CRIMINAL - amounts to an offence subject to a penal sanction. CIVIL - unable to enforce the rights under the contract entered into by the business against third parties. TASK TO BE COMPLETED BEFORE NEXT TUTORIAL (WEEK 1) Go ahead and complete the course on "Essentials of Starting a Business" (ESB) in ACRA e-learning portal before your tutorial next week. Please access ESB via https://elearn.acra.gov.sg/acra/AAEnrolment/PublicCoursewareListings.aspx ACRA Academy eLearning Portal What is a sole proprietorship? The business is owned by one person who undertakes all responsibilities and is entitled to profits. The Sole Proprietor is liable for debts arising from the business. Pros 1. Easy to set up, manage and dissolve. 2. ⁠ ne-man O enterprise. Cons 1. Difficulty in obtaining loans. 2. ⁠ Sole proprietors and their businesses are treated as one. 3. A sole proprietor has unlimited liability for unpaid business debts and is personally responsible for all the firm's obligations. Creditors can claim their debts from the sole proprietor's assets. If these assets are insufficient, the sole proprietor may be declared bankrupt. 3. ⁠Sole proprietorship can be brought to an end by death, bankruptcy or mental incapacity. Partnership DEFINITION Definition: the relation which subsists between persons carrying on a business in common with a view of profit (Section 1 Partnership Act 1890). No. of Partners Minimum: 2 or more persons formed to carry on a business. Maximum: 20 persons except professional partnerships (no limit) (If more than 20 partners, the partnership will be converted to a Company limited by shares.) TYPES OF PARTNERSHIP ORDINARY PARTNERSHIP 1. Partners have an equal share in the running of the business and profits. Partners are also liable for the firm’s losses/debts unless agreed otherwise. The partnership firm is not a separate entity from the partners. Partners owns and manage the partnership. 2. A partnership can sue and be sued in the firm’s name. 3. The partners are agents for each other. 4. Partners are jointly and severally liable to third parties for debts of the firm and wrongful acts and omissions. 5. Partnerships can either be terminated by death, bankruptcy or mental capacity. 6. Partnership can be dissolved voluntarily or according to the terms of the Agreement. LIMITED PARTNERSHIP (LP) Reference : Acra. (2018b, April 25). Registering a limited partnership in Singapore [Video]. YouTube. https://www.youtube.com/watch?v=InmVnWjUDpU 1. A Limited Partnership (LP) has two types of partners, namely General Partners and Limited Partners. 2. No. of Partners Minimum: 2. There must be at least one General Partner and one Limited Partner. Maximum: There is no limit. 3. Limited Partnership is not a separate legal entity. 4. A Limited Partnership cannot sue or be sued in its name and does not have the right to own property in its own name. 5. A Limited Partnership is attractive to investors who desire protection from liability and do not wish to participate actively in the management of the Firm. General Partners (GP) manages the business/firm. has unlimited liability.  benefits from the investment by the limited partners, but the General Partners remain liable for all the debts and obligations of the LP Limited Partners has no right to participate in the management of the Firm. has no right to enter into any contracts that bind the Firm have limited liability and are not personally liable for the debts beyond the amount agreed to be contributed. Partnership is not a separate legal entity. Limited Partners lose their protection of limited liability if they participate in the management of the Firm. LIMITED LIABILITY PARTNERSHIP (LLP) Acra. (n.d.). Registering a Limited Liability Partnership (LLP) in Singapore [Video]. YouTube. https://www.youtube.com/watch?v=aZohizeIPuA 1. LLP is a partnership but with limited liability for partners for the firm's debts. (s8 LLP Act). It has the features of an Ordinary partnership and a Company. LLP has limited liability of general trading debts, but not their individual liability for negligence 2. LLP is a separate legal entity from its partners and can sue and be sued under its own name. 3. It can enter into contracts, hold property and exist irrespective of changes in partners (perpetual succession). 4. It must keep proper accounting records and disclose its insolvency status. There is a comprehensive winding-up process - Limited Liability Partnership (Winding Up) Rules. 5. LLP does not have to file or audit its accounts or appoint a company secretary. 6. LLP will be taxed as a partnership (personal tax rates). NOTES: company formed under Company Act is an incorporated form of business organization. Once it is registered, it becomes a separate legal entity. 1. A company is a body corporate having the right to sue and be sued. (s19(5) Company Act 1967. 2. It has the power to hold land (including property) in its name and enjoys perpetual succession. 3. The company is liable for all the debts and obligations contracted under its name. 4. Members of a Limited Liability Company may not be personally liable for the debts of the Company. 5. Members of Limited Liability Company may be liable to contribute to the assets of the Company in winding up, if they have not fully paid for the shares. 6. Members are protected from legal actions brought in the name of the Company unless they are guilty of some fraudulent act or have contravened some statutory provisions. 7. Ownership of the property is vested in the Company and not affected by the change in the shareholders or directors. 8. It is easier to raise capital, obtain loans and transfer shares in the Company. Disadvantages 1. Loss of privacy as accounts and other documents must be filed in ACRA. 2. Administrative expenses involved in incorporation and administration can be high. 3. Cost of annual audit for all public companies and exempt companies with annual turnover of more than SGD 5million. and private companies that do not fulfil 2 out of 3 criteria consecutively in the last two years.