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Disadvantages Of Entities


Disadvantages / Cons of All Types of Business Entities and Firms in Singapore

Here we bring you to a comparison chart of cons / disadvantages of different types of business structures / forms / organisations / firms / entities in Singapore.

Click here to view the comparison of Singapore Business Entities & Firms (In PDF).
Click here to view the Pros / Advantages And Cons / Disadvantages of all types of Business Entities & Firms in Singapore. (In PDF)

Here you can have a brief of major disadvantages / cons of most popular types of business entities and firms in Singapore:

No
Type of Entity / Firm
Disadvantages / Cons
1
Pte Ltd (By Shares)
ย 
  • Higher registration cost and also costly to maintain
  • More compliance obligations (e.g., a company secretary has to be appointed within 6 months of the companyโ€™s incorporation)
  • Annual General Meeting has to be conducted
  • Annual Return filing with the Authority
  • Estimated Chargeable Income and Corporate Tax to be filed
  • Limitation in Fund Raising compare to Public Company
2
Limited Liability Partnership (LLP)
  • Profits are taxed are based on the ownerโ€™s income level โ€“ this means that as the ownerโ€™s income level increases, taxes increase as well due to Singaporeโ€™s progressive tax system
  • Not eligible for Government funded micro loans
3
Limited Partnership (LP)
ย 
  • Risks to the general partners:ย In a limited partnership, the general partners must carry the burden of all the businessโ€™s debts and obligations. If the company is sued or enters into bankruptcy, all debts and liabilities are the responsibility of the general partners.
  • Also, each general partner has the ability to make decisions on behalf of the company, and those decisions become the responsibility of all the general partners.
  • Compliance challenges:ย A general partnership does require less paperwork than a corporation, but because in essence you have investors (the limited partners), you must still hold annual meetings and create a detailed partnership agreement.
4
Partnership (General)
ย 
  • Partners face unlimited liability for all the debts of the partnership. This means that the personal assets of each partner are at risk.
  • Partners are jointly liable for partnership debts. This means that if one partner fails to pay his share of the partnership debt, the other partners must make up the shortfall.
  • Any individual partner can be sued for all the debts of the partnership.
  • The partnership does not have its own separate legal identity from the partners. Therefore, unless otherwise agreed, the partnership will come to an end each time a partner leaves.
  • The avenues available for access to further capital for expansion are restricted by the amount of security that can be given personally by the individual partners.
5
Sole Proprietorship
ย 
  • A sole-trader has unlimited liability. This means that if the business should collapse, the sole-trader could loose not only the cash and other assets invested in the business but all his/her personal assets as well excluding HDB flat, to meet the debts of the business.
  • As there is only one person with overall responsibility for the success of the business this may increase the pressure on that individual.
  • A sole-proprietorship is a business firm owned by one person or one locally incorporated company. There are no partners. The sole-proprietor has absolute say in the running of the business firm. Management rests on that one person and his liability is unlimited.
  • There is no requirement for a sole-trader to maintain accounts for auditing purposes however the records shall be kept for five years. For tax purposes, a balance sheet or statement of affairs as at the end of the year and a detailed profit and loss account must be submitted to the tax authorities.
  • If such a business fails or is declared bankrupt, the creditors can sue the proprietor for all debts incurred. A legal claim can be made against the personal assets of the proprietor.
  • In addition to personal income tax the owner is mandatorily required to top-up his/her Medisave Account for the net trade income after tax assessment.
  • Sole Proprietor could not transfer the ownership of Firm however the assets & liabilities of the Firm could be easily transferred to another person.
Source of Information, Guidelines, Compliance, Laws, Rules & Regulations is from the websites of relevant authorities of Singapore
Details of Source Name of Authorities
  • Corporate matters such as Companies, Businesses, etc
  • The Accounting and Corporate Regulatory Authority (ACRA)
  • CPF matters
  • CPF Board
  • Fair Employment Practices (FEP)
  • Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP)
  • Immigration matters & Student Passes
  • Immigration Checkpoints Authority (ICA)
  • Taxation and GST
  • The Inland Revenue Authority of Singapore (IRAS)
  • Skills Development Levy (SDL)
  • SkillsFuture Singapore Agency
  • Work Passes
  • The Ministry Of Manpower (MOM)
Please refer to GUIDES for Type of Firms & Entities for more details, information or ย CONTACTย us if you wish to know about these or many other services.

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