There are 3 main types of business organizations in Singapore:
1. Sole proprietorship 2. Partnership 3. Companies
Business Organizations Sole Proprietorship
Sole Proprietorship One person in business for himself It is the simplest and most flexible business structure
Business Organizations Sole Proprietorship (1)
Characteristic of Sole Proprietorship Owned by one person or one company is not a legal entity (i.e. it cannot sue or be sued in its own name and it cannot own or hold any property) Profits are taxed at personal income tax rates 3
Business Organizations Sole Proprietorship (2)
Formation of Sole Proprietorship All sole-proprietorships must be registered with the Accounting and Corporate Regulatory Authority (ACRA) Almost anyone or any company can register a sole-proprietorship Un-discharged bankrupts may not be allowed to register such entities in Singapore 4
Business Organizations Sole Proprietorship (3)
Formation of Sole Proprietorship The owner must appoint a local manager if he/she is not "ordinarily resident" in Singapore. A person is not "ordinarily resident" if he/she: does not have a local address and cannot legally remain in Singapore for a long period of time 5
Business Organizations Sole Proprietorship (4)
The local manager must be above 18 years old and be one of the following: a Singapore Citizen a Singapore Permanent Resident an Employment Pass holder an Approval-in-Principal Employment Pass holder a Dependant Pass holder 6
Business Organizations Sole Proprietorship (5)
Set Up Costs Fees for approval of business name: (S$15) per name Registration fees: (S$50) Yearly renewal fees: (S$20)
Business Organizations Sole Proprietorship (6)
Advantages of Sole Proprietorship Quick and easy set up Easy to administrate Do not need to audit their accounts or file annual returns with ACRA Easy to manage - The owner is the sole decision maker Exclusive use of profits The owner receives all the business profits 8
Business Organizations Sole Proprietorship (7)
Disadvantages of Sole Proprietorship Owners liability is unlimited The owner is personally accountable for debts and losses. The owner may be required by law to sell off personal assets (e.g. house, car, shares, etc.) to pay off debts and losses Limited borrowing power. Financial institutions may be more reluctant to lend money to sole proprietorship 9
Business Organizations Sole Proprietorship (8)
Duration and Dissolution of Sole Proprietorship May give up business without much fuss De-registration or cessation of business
Dies when owner dies
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Business Organizations Partnership
Partnership Partnership type of business structure attempts to address the limited-expansion constraint faced by a sole proprietorship by allowing more two or more person to own the business
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Business Organizations Partnership (1)
There are 3 types of partnerships in Singapore: 1. General Partnership 2. Limited Liability Partnership (LLP) We will focus on this
3. Limited Partnership
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Business Organizations General Partnership
General Partnership At least two members and maximum of 20 Section 17(3) of the Companies Act partnership consisting more than 20 members must be registered as a company This section does not apply to lawyers, doctors or accountants 13
Business Organizations General Partnership (1)
Characteristic of General Partnership Owned by more than one partners, a company could be a partner Is not a legal entity (i.e. it cannot sue or be sued in its own name and it cannot own or hold any property) Profits are taxed at personal income tax rates Generally all partners have equal rights A partner can be held accountable for the other partners acts 14
Business Organizations General Partnership (2)
Formation of General Partnership All partnership must be registered with the Accounting and Corporate Regulatory Authority (ACRA) See above: formation of sole proprietorship To prevent dispute, it is advisable that a partnership agreement is drawn up 15
Business Organizations General Partnership (3)
Advantages of General Partnership Quick and easy set up Do not need to audit their accounts or file annual returns with ACRA Easy to manage Partners are the sole decision makers Exclusive use of profits The partners receive all the business profits 16
Business Organizations Limited Liability Partnership
Limited Liability Partnership (LLP) A Limited Liability Partnership combines the limited liability features of companies with the operational flexibility of partnerships.
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Business Organizations Limited Liability Partnership (1)
Characteristic of LLP At least 2 members (section 22 of LLP Act) A partner can be the owner of a business, a partner in another LLP or a shareholder in a company The partners of the LLP will not be held personally liable for any business debts incurred by the LLP 18
Business Organizations Limited Liability Partnership (2)
Characteristic of 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 Governing Act is LLP Act 19
Business Organizations Limited Liability Partnership (3)
Characteristic of LLP The law relating to partnership shall not apply to a LLP But acts of partners of general partnerships and LLPs are binding on the partnerships and LLPs, except: Where the partners have no authority to act, and 3rd party knew of the lack of his authority or did not know or believe him to be a partner 20
Business Organizations Limited Liability Partnership (4)
Characteristic of LLP Section 5 if the LLP Act stipulates: LLP can both sue and be sued Acquire, hold, own and dispose of movable and immovable properties
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Business Organizations Limited Liability Partnership (5)
Formation of an LLP You may log into www.bizfile.gov.sg using your ID No and SingPass to submit an application to register a new LLP Engage the services of a professional firm or service bureau to submit the online transaction on your behalf most common method 22
Business Organizations Limited Liability Partnership (6)
Formation of an LLP Call at ACRA to use the BizFile Kiosks to submit the online transaction Word such as "Temasek" is prohibited to be used Every LLP is required to have at least one manager who is a natural person of full age and capacity and ordinarily resident in Singapore The manager is answerable to matters to be dealt with by the LLP under Section 24 of LLP Act: 23
Business Organizations Limited Liability Partnership (7)
annual declaration of solvency and insolvency and publication of names, registration numbers, etc
A SPR (18 yrs and above) can be appointed as a manager A foreigner with EP or DP can be a manager
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Business Organizations Limited Liability Partnership (8) Statutory requirements of LLP
Required to file annual solvency or insolvency status No need to prepare and submit audited accounts to ACRA, but is required to keep accounting and other records for 7 years
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Business Organizations Limited Liability Partnership (9)
Statutory requirements of LLP The LLP Act does not prescribe accounting standards to be adopted. But the accounts must still satisfy the "true and fair" view test No need to file Annual Returns to ACRA But the manager is required to submit an Annual Declaration (online) to ACRA stating whether the LLP is able or unable to pay its debt 1st Declaration must be filed 15 months from the date of registration Subsequently to be filed once every calendar year
Not required to hold AGM
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Business Organizations Limited Liability Partnership (10)
Advantages of LLP compared to Companies Easier to administer as there is no obligations to maintain statutory registers Only need to appoint manager, not officer of the LLP No statutory obligation to enter into limited liability partnership agreement 27
Business Organizations Limited Liability Partnership (11)
Advantages of LLP compared to Companies Even if there is an agreement, no need to lodge with the Registrar. Companies have to file MOA with the Registrar of Companies No statutory obligations to prepare accounting records Partners have more freedom to in prescribing terms of management and control of the LLP by agreement 28
Business Organizations Limited Liability Partnership (12)
Advantages of LLP compared to Companies A body corporate can be a partner, which may be attractive for some business
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Business Organizations Limited Liability Partnership (13)
Disadvantages of LLP compared to companies Not suitable structure for raising funds because it is partnership and there is no requirement for any accounts to be prepared, audited or file
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Business Organizations Limited Liability Partnership (14)
Disadvantages of LLP compared to companies LLP may not be may not be able to secure credits readily because there is no requirement for any accounts to be prepared, audited or file LLP will not be able to avail itself of the insolvency restructuring and rehabilitation process, which companies could under section 210 & 227 of the Companies Act 31
Business Organizations Limited Liability Partnership (14)
Closing an LLP You may wind up the affairs of the LLP voluntarily. The LLP may also opt for creditors voluntary winding up. The LLP can also be wound up under an Order of Court. The LLP may apply to strike its name off the register pursuant to Section 28 of the LLP Act 32
Business Organizations Companies
Companies Is an incorporated association and is registered under the Companies Act (Cap 50) Types of companies: Private company limited by shares (Pte. Ltd.) Exempt or Non-exempt Private Company Public Company limited by shares (Ltd.) Public Company limited by guarantee 33
Business Organizations Companies (1)
Private company limited by shares (Pte. Ltd.) Private company limited by shares no more than 50 shareholders Exempt Private Company not more than 20 shareholders, and no corporation holds a beneficial interest Exempted from filing balance sheet and profit and loss account with ACRA 34
Business Organizations Companies (2)
May make loans to the directors and to companies to which its directors are interested A private company that is wholly owned by the Government may be declared to be an exempt private company by the Minister of finance , if the national interest requires it
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Business Organizations Companies (3)
Public Company limited by shares (Ltd.) A public company limited by shares is a locally incorporated company in which the number of shareholders can be more than 50 A public company must register a prospectus with the Monetary Authority of Singapore before making any public offer of shares and debentures 36
Business Organizations Companies (4)
Public Company limited by guarantee A public company limited by guarantee is one which carries out non-profit making activities that have some basis of national or public interest, such as for promoting art, or charity etc. The Minister may approve the registration of the company without the addition of the word Limited or Berhad to its name 37
Business Organizations Companies (5)
Characteristics of Companies At least 1 members. Generally not more than 50 members A separate legal entity It can both sue and be sued in its own name May own property in its own name 38
Business Organizations Companies (6)
Characteristics of Companies May incur debts and liabilities own its own behalf Members not liable for debts and liabilities incurred by the company It has limited liabilities Companies properties are not legally owned by members 39
Business Organizations Companies (7)
Incorporating a local company Log into BizFile using his/her identification number and SingPass to submit an online transaction (For self-incorporation, the proposed directors, secretary and subscribers must all be Singapore NRIC holders) Engage the services of a professional firm (e.g. lawyers, accountants, chartered secretaries) or a service bureau 40
Business Organizations Companies (8)
Incorporating a local company Need to register with ACRA MOA. Can use a standard one (Table A Fourth Schedule in the Companies Act) Proposed directors/secretary and subscribers to endorse their consent online via BizFile within 3 days of submitting their application for incorporation 41
Business Organizations Companies (8)
Incorporating a local company Foreigner, who is not a Singapore Permanent Resident (PR), may apply for EntrePass from the Ministry of Manpower (MOM) in order to register a company in Singapore A foreigner, who does not apply for EntrePass, may instead appoint a locally resident director to register a company in Singapore and continue to reside outside Singapore 42
Business Organizations Companies (9)
Incorporating a local company All applications to ACRA must be submitted via our online filing and information retrieval system, BizFile Foreigners are required to login to BizFile using their identification number (FIN No.) and SingPass
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Business Organizations Companies (10)
Incorporating a local company Must have at least one director who is an ordinarily resident (the usual place of stay of a person) in Singapore. any person aged 18 years and above may be appointed as a director, except bankrupts Every company must appoint a secretary within 6 months of the date of its incorporation
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Business Organizations Companies (11)
Incorporating a local company A company shall appoint an auditor within 3 months from the date of its incorporation, unless it is exempted from audit requirements under Section 205B, or 205C, of the Companies Act. Section 205B refers to dormant companies and Section 205C refers to exempt companies 45
Business Organizations Companies (12)
Incorporating a local company A company must have a registered office in Singapore which must be operational and accessible to the public during normal office hours. Please note that a P.O. Box address cannot be used as a business address
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Business Organizations Companies (13)
Statutory obligations of companies Filing Annual Return with the Registrar Company is required to hold its first AGM within 18 months after its incorporation Subsequent AGMs must be held every calendar year and the interval between AGMs should not be more than 15 months 47
Business Organizations Companies (14)
Closing a local company Striking off A company may apply to ACRA to strike its name off the Register pursuant to Section 344 of the Companies Act ACRA may approve the application if there is reasonable cause to believe that the company is not carrying on business, and that the company is able to satisfy the criteria for striking off. 48
Business Organizations Companies (15)
Closing a local company Members Voluntary Winding up A company may decide to wind up its affairs voluntarily if the directors believe that the company will be able to pay its debts, in full, within 12 months after the commencement of the winding up. The company will appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications required under the Companies Act 49
Business Organizations Companies (16)
Closing a local company Creditors Voluntary Winding up A company may decide to opt for a creditors voluntary winding up if its directors believe that it cannot, by reason of its liabilities, continue its business. The company will appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications required under the Companies Act. 50
Business Organizations Companies (17)
Closing a local company Compulsory Winding up A company may be wound up under an Order of the Court under certain circumstances e.g. the company is unable to pay its debts. The Court may appoint a liquidator to wind up the affairs of the company. Where no liquidator is appointed by the Court, the Official Receiver shall be the liquidator of the company 51
Business Organizations Companies (18)
Closing a local company Receivership A company may be placed under receivership, if a receiver is appointed to enforce a charge for the benefit of holders of debentures of the company Judicial Management If a company, or its creditor(s), considers that the company is/will be unable to pay its debts and there is a reasonable probability of rehabilitating the company, instead of resorting 52
Business Organizations Companies (19)
to a winding up, the Court may upon an application, order that the company be placed under judicial management
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Business Organizations Branch of a Foreign Company
Registering a branch of a foreign company Must be registered with the Accounting and Corporate Regulatory Authority (ACRA) Need to hire a professional firm to register on your behalf Foreign company to appoint two local agents from Singapore to act on behalf of the company The agents must be ordinarily resident (the usual place of stay of a person) in Singapore
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Business Organizations Branch of a Foreign Company (1)
Characteristics of a foreign branch company A branch is not a separate legal entity Any action against a Singapore Branch is equivalent to an action against the Head Office
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Business Organizations Representative Office
Setting up a Representative Office in Singapore Setting up a Representative Office (RO) in Singapore is a good way for foreign businesses to explore business opportunities in Singapore or the region Setting up ROs in banking and insurance you need to register with the Monetary Authority of Singapore (MAS) 56
Business Organizations Representative Office (1)
Setting up a Representative Office in Singapore Setting up ROs in all other industries To set up, you need to register with International Enterprise (IE) Singapore (IE Singapore)
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Business Organizations Representative Office (2)
RO can only carry out the following activities: Market research Feasibility studies Liaison work on behalf of parent company
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Business Organizations Representative Office (3)
RO must not conduct any of the following activities (directly or on behalf of the parent Co): trade in goods/services (including import or export) Lease warehousing facilities Lease office(s) to other establishments for a fee Enter into business contracts Issue invoices/receipts Open/receive letters of credit Provide services for fees 59
Session 1 2 Key Legal Characteristics of Companies Key Advantages Disadvantages of Using Corporate Form To Do Business Concept of Lifting The Corporate V