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Registering Your Business: The Things To Consider

Registering Your Business: The Things To Consider

  • 12 October 2020
  • By OCBC Business Banking
  • 3 mins read

Welcome to the second of our three-part series on ‘Starting Your First Business’. In this post, we show you the business structures you should consider and what are your options when it comes to incorporation.


One of the things most first-time entrepreneurs find challenging is registering their new business. And while there are many guides out there, there just isn’t a lot of advice from people who have been there and done that.

That’s why we went out and spoke to our panel of successful business owners and business experts, who kindly shared their insights into business registration.


Choosing Your Business Structure

Choosing the right structure will help put your business on a sound footing, while choosing the wrong one might result in challenges to your business growth.

There are several forms of business structures you can choose from, and the most popular is the private limited company — which accounts for 70% of all forms of business registered or incorporated with ACRA in 2019. Sole Proprietorships are the second most popular, followed further behind by Partnerships.


In Separate Company

So why is incorporating a company such a popular choice for businesses in Singapore?

One big factor is that the company is a legal entity separate and distinct from its shareholders and directors. What this means is that the shareholders and directors are not personally liable for the debts and obligations of the company.

Mr. Francis Chan, Deputy Head (Disputes) of the Rajah & Tann Legal Basix Practice Group, shared the following view “While sole proprietorships and partnerships have less compliance formalities than private limited companies and cost less to set up, you or your business partners can be sued personally and be made personally liable for the mistakes made by the business.”

Mr. Lawrence Chai, Founder of 3E Accounting, also advised, “As a Sole Proprietor or Partner, the profits of your business are your personal income, of which the highest tax bracket currently is 22%. In comparison, companies are taxed at up to 17% only. Thus, incorporating as a company may save you some tax dollars in the long run.”



"While sole proprietorships and partnerships have less compliance formalities than private limited companies and cost less to set up, you or your business partners can be sued personally and be made personally liable for the mistakes made by the business.

— Mr. Francis Chan / Deputy Head (Disputes) of the Rajah & Tann Legal Basix Practice Group



Preparing For Growth

The company is a good choice of business structure for reasons of ownership and growth too. For one, a company can own assets in its own name and it can raise funds by admitting investors to the company as shareholders, who may change their stakes in the business by purchasing or selling their shares in the company.


Avoiding Pitfalls

The case for incorporating as a Private Limited Company grows further when you consider there is no easy way to convert a Sole Proprietorship or Partnership into a Company.

Mr. Jonathan Yang—Co-Founder of Muchachos and The Daily Cut restaurants—shared the experience of converting his first business from a Partnership into a Company. “You can shut down the partnership and set up a private limited company, but you’ll lose all those years of records. This matters if you want to apply for a loan. The loan criteria might require you to be in operation for 6 months to 2 years and suddenly you don’t have that.”

Lawrence of 3E Accounting echoed these sentiments, pointing out the significant challenges in transferring assets and liabilities—including trademarks, licenses, staff, and bank loans—from a previous business entity to a new Company.

All in all, it’s clear that while it takes a bit more time and resources to set up and run a company, it offers many benefits for those looking to take their business places.



"You can shut down the partnership and set up a private limited company, but you’ll lose all those years of records. This matters if you want to apply for a loan. The loan criteria might require you to be in operation for 6 months to 2 years and suddenly you don’t have that.

— Mr. Jonathan Yang / Co-Founder of Muchachos and The Daily Cut restaurants



DIY Or Outsource

Each of the business owners we spoke to recommended engaging a corporate secretary for incorporating a Company.

Jonathan of The Daily Cut warned about saving a penny and losing a dollar. He pointed out the many areas that you can be non-compliant with regulations, and “if you do the math, the incorporation service provided by corporate secretarial firms is almost free.”

Dr. Terence Tan, Founder of The Pain Relief Clinic, opined that a Corporate Secretary can be your partner throughout your business journey too.

According to Dr. Tan, “Over the years, as we grow, we will have questions along the way in terms of business structuring, tax, and of course accounting, that I will need some advice on. This is where a good corporate secretary makes a difference.”


Opening A Bank Account

80% of businesses establish a banking account immediately after registering their business.

Among other things, you need a business banking account to deposit your paid-up capital (PUC), and pay for business licenses and permits. 

Mr. Vincent Teoh, founder of Zoo-phonics Asia enrichment centres and the Safari House chain of pre-schools, is a Certified Practicing Accountant (CPA). He shares an important piece of advice.

“To ensure your business is sustainable, you must keep your business money and personal money separate, otherwise it is hard to differentiate between the two. Especially if you have partners, there is a serious need to have separate accounts to avoid conflict on money matters.”

You’ll be happy to know that OCBC's Business Growth Account is highly suitable for first-time entrepreneurs.

Your account can be opened instantly online with MyInfo (log in with your SingPass), saving you time and hassle. There is no initial deposit or minimum balance requirement, which means you don’t have to tie up precious business capital.   


Summing Things Up

We hope the first-hand knowledge and insights from our panel of business owners and leading experts have shed some light on the right structure for your business. Let us know if they have made a difference in helping you make the right decisions.

Here at OCBC, we’re always on the lookout for quality advice and information to help you grow in your business. Let us be your partner in every step of your entrepreneurship journey. Read on for practical advice for your startup.

Disclaimer

You may be directed to third party websites. OCBC Bank shall not be liable for any loss suffered or incurred by any party for accessing such third party websites or in relation to any product and/or service provided by any provider under such third party websites.

Any opinions or views of third parties expressed in this article are those of the third parties identified, and not those of OCBC Bank. The information provided herein is intended for general circulation and/or discussion purposes only. Before making any decision, please seek independent advice from professional advisors.

No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake an obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein. Any reference to any specific company, financial product or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation on the same.


OUR PANEL OF EXPERTS

Francis Chan — Deputy Head (Disputes)
Rajah & Tann Legal Basix Practice Group

Francis Chan — Deputy Head (Disputes)
Rajah & Tann Legal Basix Practice Group

Francis is a leader of Rajah & Tann’s Legal Basix practice which provides growth-stage legal advice, representation and documentation to emerging enterprises, start-ups, SMEs and high growth companies. Francis advises clients in respect of commercial disputes involving shareholders / directors, tenancy, contract and debt recovery. Francis specialises in employment law and has advised institutional employers and C-suite/management level employees including conducting investigations and disciplinary proceedings, litigating employment disputes, and engaging with and resolving disputes with the MOM / CPF Board / TADM / TAFEP and union representatives.

Lawrence Chai — Founder
3E Accounting

Lawrence Chai — Founder
3E Accounting

A Chartered Accountant by training, Lawrence heads 3E Accounting International, the largest homegrown accounting network with a global presence in more than 80 countries worldwide. A firm believer in employees-come-first culture, Lawrence has led 3E Accounting Pte. Ltd. to become the first SME accounting firm to be unionised in Singapore.

Jonathan Yang — Co-Founder
The Daily Cut and Muchachos

Jonathan Yang — Co-Founder
The Daily Cut and Muchachos

Jonathan wanted nothing but to make a perfect burrito. This passion project led him to leave his job as a PR professional to start Muchachos. With the success of his first restaurant, he went on to start The Daily Cut, one of the first protein-focused salad bars in the days of its establishment. Today, The Daily Cut name is synonymous with healthy eating and serves the health-conscious office crowd in three locations.

Dr. Terence Tan — Founder
The Pain Relief Clinic Pte. Ltd.

Dr. Terence Tan — Founder
The Pain Relief Clinic Pte. Ltd.

Since starting The Pain Relief Clinic over a decade ago, Dr Tan has been introducing non-invasive treatments for joint, muscle and sports conditions. The business has grown to include clinics in both Surabaya and Jakarta as well as distribution activities in Myanmar. He is also actively working with strategic partners to spread these modern treatments internationally in Maldives, Cambodia and Vietnam.

Vincent Teoh — Executive Director & Co-Founder
Safari House Preschools and Zoo-phonics Asia

Vincent Teoh — Executive Director & Co-Founder
Safari House Preschools and Zoo-phonics Asia

Vincent has more than 15 years of financial management experience gained from working in top global financial institutions across Asia, Australia and New Zealand. He is also a member of ISCA and CAANZ. His commitment to nurturing a passion for learning in children has driven him to grow his business to 20 centres under the Zoo-phonics School, Zoo-phonics Kindergarten and Safari House Preschool branding in Singapore and Malaysia.

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