Here we bring you to a comparison chart of cons / disadvantages of different types of business structures / forms / organisations / firms / entities in Singapore.
Here you can have a brief of major disadvantages / cons of most popular types of business entities and firms in Singapore:
Type of Entity / Firm
Disadvantages / Cons
- 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 company’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
- Profits are taxed are based on the owner’s income level – this means that as the owner’s income level increases, taxes increase as well due to Singapore’s progressive tax system
- Not eligible for Government funded micro loans
- Risks to the general partners: In a limited partnership, the general partners must carry the burden of all the business’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: 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.
- 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.
- 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)
- Fair Employment Practices (FEP)
- Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP)
- Immigration matters & Student Passes
- Immigration Checkpoints Authority (ICA)
- The Inland Revenue Authority of Singapore (IRAS)
- Skills Development Levy (SDL)
- SkillsFuture Singapore Agency
- The Ministry Of Manpower (MOM)
Please refer to GUIDES for Type of Firms & Entities for more details, information or CONTACT us if you wish to know about these or many other services.