Singapore is one of the best places to launch your business or kick-start its expansion within Southeast Asia. Its strategic location, coupled with its progressive and robust economy, makes the Lion City the perfect place for nurturing a commercial endeavour that is designed to flourish and grow rapidly in the digital age. To make the most of your time and maximise the potential of the investment that you will pour into your business, you need to set a solid foundation for it. This means meticulously planning how to set up business in Singapore, including the structure that will best fit the venture that you have in mind.
There are different types of business structures, and each has its pros and cons. It’s worth taking a quick look at each type before determining how you can find the best option for your business.
- A business that is owned by 1 person falls under sole proprietorship.
- A business owned by 2 to 20 partners falls under a partnership.
- A business is a limited partnership when it has 2 or more partners where at least 1 is a general partner and at least 1 is a limited partner.
- A limited liability partnership operates as a partnership while having a separate legal identity, just like a private limited company.
- A company is a business with a legal identity that is separate from that of its directors and shareholders.
Deciding which among these 5 options is the best match for your business in Singapore is a task that requires careful consideration. There are, however, a few questions that you can use to guide you in making the right decision. Before choosing, ask yourself the following questions:
How many people will share ownership of the business?
First and foremost, the structure you should choose for your endeavour depends on the number of owners that the business will have. If you’ll be the sole owner of the establishment, then a sole proprietorship business structure should be well-suited to your plan. However, if you’re setting up a business in Singapore with the assistance of more than one partner, it’s best to consider other structures.
What is the nature of the business that you are trying to put up?
There are types of businesses that are a good fit for certain structures. A small trading business or one that offers professional services, for example, can be a great fit for a sole-proprietorship structure. However, if you’re planning to put up a bigger company or you’re representing a business that plans to expand to Singapore, then other structures may be able to serve your purpose better.
How much capital will you need to put up the business?
The ease of acquiring capital is also an important concern when deciding which business structure to choose. Again, if you’re all on your own and you plan to set up and grow your business by investing solely your time, effort ,and other resources in it, then you’re likely self-sustaining enough to support an enterprise structured as a sole proprietorship. If you have loftier goals and are looking into building a more scalable business, then you’ll likely need to partner with others to come up with the amount that you’ll use as capital. In exchange for pooling your resources together, your partners might want to play a bigger role in the business by being a general partner or a limited partner.
How much responsibilities and liabilities are the owners willing to assume?
Aside from counting the number of partners that the business will have, it’s also imperative to consider which of these partners, if any, will serve as general partners and which ones will be limited partners. General partners play a role in the day-to-day operations of the business and assume responsibility for the actions of an establishment. They also have unlimited liability, which means that they will shoulder the venture’s debts if it fails. Limited partners, on the other hand, are part-owners whose debts cannot exceed the amount they invested in the business and do not include their personal assets.
If your business is under sole proprietorship, then you assume unlimited liability and can be sued under your own name or that of the business. At the same time, you’ll be solely liable for the debts of the establishment.
Considering the business structure, will the venture be easy to set up, manage, and close?
Finally, the structure of the establishment that you will set up will have an impact on how easy or difficult it will be to start, manage, and close the business. If you’re all on your own, you can do all these without getting the opinion of others, but this also means that all the work will likely fall on your shoulders. If you have partners, then you can depend on each other to ensure the success of the enterprise, but you also need to consult each other’s opinions before making decisions that will impact the operations and prospects of the business.
Before making a move, carefully consider all the details of the business that you want to establish in Singapore and its pros and cons. Unless you’re prepared to take on all the responsibilities and freedoms that come with being a sole proprietor, it’s best to look for competent and reliable people with whom you can work and build a shared vision of a thriving business in the Lion City.