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A sole proprietor business is one that is owned and controlled solely by an individual. It does not provide as a separate legal entity from the owner, and the owner has unlimited liability over the business. This means that the business can sue or be sued in the sole proprietor’s name. The owner is personally liable for any debts or losses to the business.

A partnership business is one that can be owned by 2 to 20 people. Similar to a sole proprietor, the business is not a separate legal entity from its owners. The partners are personally liable over the business, and it can sue or be sued in the partners’ names. Partners are personally liable for the business’ debts and losses.

A private limited company is a legal entity that is separate and distinct from its shareholders and directors. It is one that comprises up to 50 shareholders, where the members of the company are limited in liability by their shares. It can sue or be sued in the company’s name, but members are not personally liable for debts or losses of the company.

Ownership in terms of profits

Due to the nature and structure of the businesses as mentioned above, ownership is important in considering whether to run a business in which model. If one wants complete management and ownership over their company, a sole proprietor or partnership would be more applicable. This translates to when profits are earned from the business, they will fully go straight to the sole proprietor or partners’ pockets.

On the other hand, private limited companies are owned by shareholders who appoint directors to manage the company. Company performance and profit generation is the responsibility of these directors. When the company makes a profit, it is shared among the shareholders proportionally based on the number of shares they hold. This means that even as companies may stand to make larger profits due to its size, the profits are split to a greater extent due to the multitude of shareholders a company may have. 

If I am a foreigner

Foreigners cannot apply for sole proprietorship or partnership, but they can apply and fully own a private limited company. If a foreigner who resides outside wants to register either a sole proprietorship or partnership, they must appoint a locally resident authorised representative. This representative must be a person aged at least 18 years old living in Singapore and of complete legal capacity. Foreigners residing in Singapore on the other hand would have to seek approval from the Ministry of Manpower before registering as a sole proprietor or partnership. Hence a foreigner or group of foreigners might find it cost saving and more convenient to run a business as a private limited company.

Considering the ease of obtaining capital for your business

Sole proprietors and partnerships are less attractive to potential investors as they do not sell shares due to its complete ownerships by the owners. Hence, the capital fueling the business usually stems from the owners own pockets who contribute into funding and running the business. Moreover, it is usually more difficult for a small business to obtain loans. Thus, if obtaining funds and capital for the business is something that is required for the business to be sustainable, then operating a sole proprietor or partnership may be less feasible in the long run.

On the other hand, private limited companies find it easier to make bank loans and are more attractive to investors as it is able to sell shares. Shareholders will also be attracted to companies more because they can make profits from the company while being limited in their liabilities.

Legal administration and formalities

In general, sole proprietorships and partnerships have less legal formalities and obligations that they have to fulfil year on year. This includes mainly the renewal of their business registration and their declaration of personal income tax rates (since profits made by these 2 such businesses are only taxed at the owner’s personal income tax rates).

Companies are subject to a larger amount of responsibilities in its administration work. For example, the employment of a Company Secretary is necessary to file annual returns. There are also statutory requirements for general meetings, directorship, share allotments etc. This might make it more burdensome and costly to set up and run as compared to sole proprietors or partnerships.

Taxes

A private limited company pays taxes at the standard corporate rate of 17%. Moreover, it is eligible for tax exemptions under certain criteria. On the other hand, a sole proprietor or partnership pays taxes based on the owner’s personal income tax rates, which is progressive from 0 to 22%. This means that when earnings of a sole proprietor or partnership business is low, they relatively pay less than what a company would. However as business profits increase, the private limited company would pay a lower percentage of taxes in comparison.

Money is the key to any business. Without sufficient funds, it is easy for a business to fall into a downward spiral of negative consequences. The biggest reason for many small startups failing each year stems from the lack of funding or capital, as these are essential in sustaining a business and generating revenue. Hence when starting a business in Singapore, it is always important to question how you are going to finance your startup. Here are some avenues available to Singapore businesses in terms of funding a startup.

1. Bootstrapping

Bootstrapping, or self-funding, refers to the process of a business utilising existing resources that it has, in this case using personal savings and finances to fund the startup. This is the most obvious and convenient method of funding for your business as it is easy to invest from your own savings or even get family and friends to contribute. This will give your business a baseline of funds that is simple to raise with minimal formalities and compliances, since the funds are either coming directly from yourself or relatives. Especially since you are taking ownership of your startup, having the means to self-fund would be a good way to be well connected and tied to your business.

The flexibility and ease of funding makes bootstrapping a good first option to be considered, however this only works if your business is a small-scale enterprise. For large businesses, self-funding may be difficult and also unsustainable.

2. Crowdfunding

Crowdfunding is a more modern way of obtaining funds from interested consumers who contribute money to the business as a way of supporting the idea of the business. Crowdfunding is done through online platforms (e.g. Kickstarter, Indiegogo, FundedHere etc.) where entrepreneurs are able to put up detailed descriptions or pitches of their business. They will include the goals and intentions of the business and of course how much funding is needed and why. This will allow funders to have a clear idea of the entrepreneur’s business model and decide if they are willing to support it. If they are sold, funders can make an online pledge to the business and donate funds according.

Crowdfunding is a considerable option because it allows you to seek financial support from multiple funders and at the same time acts as a marketing avenue to the online community. Crowdfunding also makes funding simpler for your business by gaining support from common people as compared to turning to professional investors or brokers which may make the process more troublesome. Moreover, there is a chance in attracting venture capital investment if the business campaign grows and is successful.

However, the trouble with crowdfunding is that it is an extremely competitive avenue to utilise and it can be difficult especially if there exists similar business ideas. Hence, ideas pitched on crowdfunding platforms have to be unique, engaging and reliable if it wants to stand out from others and gain the attention of consumers.

3. Angel Investments

Angel investors are investors who have a high net worth and hence are able to provide financial support for small startups and businesses. In return, angel investors usually gain ownership equity in the business. Angel investors usually contribute in the early stages of a company’s growth, but may also keep ongoing injections to the business to support the business through times of need. Angel investors may also work in groups of networks to collectively decide on investing in a business.

Angel investments are a good alternative of funding as these investors are willing to take bigger risks on the business as they can expect to gain higher returns. Moreover, angel investors not only provide capital to entrepreneurs but also offer mentorship and advice to them. However, a problem with angel investors is that they usually provide lower amounts of investment as compared to venture capitalists.

4. Venture Capital

Venture capital is form of professional financing where investors provide financing to companies that have high prospective growth potential. Venture capital is usually given to small companies with great prospects, or those that are beyond the startup stage and already generating decent revenue. Venture capitals not only provide monetary support, but also support in terms of mentorship and expertise. This can help sustain a business effectively, especially startups.

However, venture capitalists have a short life span in terms of funding for businesses and usually leave after three to five years, once they have recovered their investment. As venture capitalists are heavily involved in your business, it is common that some control over your business may be lost to them. Venture capitalists also usually seek big and stable companies hence being a startup with unconvincing levels of stability may find it hard to attract such investors.

5. Business Incubators and Accelerators

Businesses can seek Incubator or Accelerators, which are programs that fund and assist startups. Incubators and Accelerators in Singapore include Startupupbootcamp Fintech, DBS, Hotspot Pre-Accelerator, Singtel Innov8 and more.

A business incubator is one that nurtures a business, providing tools, training and networking to the business. On the other hand, an accelerator also assists in similar ways but more so to help run or fast-track a business. These programs also provide the business owners opportunities to interact and connect with mentors, investors and the other startups on the program, thus providing for a collaborative support network. However, both of such types of programs usually run for 4 to 8 months and expect a large amount of commitment.

6. Bank Loans

Banks may provide financial help in 2 forms: Capital loans and funding. Working capital loans is one that is used to finance the everyday operations of the company. These are more for uses such as covering accounts payables and wages and not for purchases of long-term assets or investments. Funding on the other hand is one that involves the business sharing its plan, valuation details and reports for which a loan would be given.

Almost every bank in Singapore offers such financial assistance through programs such as the DBS BusinessTerm Loan, OCBC Business First Loan and UOB BizMoney.

There are other forms of fund raising for a business in Singapore that may not directly involve investors but still provide sufficient and attainable capital. There are avenues such as through business plan competitors where prizes for a business can be won, or Peer-to-peer (P2P lending) platforms that connect the public to businesses in need of funding. The Singapore government also provides programs that introduce grants to help growing businesses, such as the Productivity Solutions Grant, Enterprise Development Grant and PACT Scheme.

An electronic signature is one that allows someone to sign documents digitally as an alternative to using the traditional handwritten method. This serves as a quicker and more convenient method of agreement and saves the trouble and mess with masses of physically printed out documents. In today’s day and age where going digital and online becomes more popular, there is a growing use of electronic signatures for various types of transactions, especially in Singapore. However, before one decides if an electronic signature is sufficient for its business transactions, they should know the laws that govern the use of the electronic signature.

The Electronics Transactions Act

When it comes to any transaction, Singapore’s contract law states that any contract is considered legally binding if the parties have clearly and willingly agreed, whether the agreement may be verbal, on paper or digital.

In Singapore, the use and security of electronic signatures is governed by the Electronics Transactions Act (ETA), which provides a legal foundation for the use of electronic signatures in contracts or transactions. This provides a certain set of standards and regulations that signatures must meet to be valid. This would ensure that the transacting parties have a reliable and appropriate set of rules to follow such that they can have concrete proof of the signed documents. The conditions that must be met are as such:

1. There must be specific identification of the signed document. This refers to the ability for one to personally identify with the signature, such as a name, date or company address. This gives a unique value to the signature and not leave room for ambiguity.
2. There must be a clear intention of the signer reading and agreeing to the transaction documents. It must be clear that the content and the signature are linked, such as it being in the same document and not separated.
3. The electronic signature must be reliable and appropriate for which the electronic record was generated and communicated.

Once knowing the requirements to an electronic signature, it is also important to know that electronic signatures do not necessarily have to look like a copy of your handwritten signature on the screen. There are several forms that an electronic signature can take which still make them legally binding according to the ETA.

• The sender’s name used in an email – When typing out emails and signing off with your name, it can be considered as an electronic signature especially when using a corporate account that you are held accountable for. This signature proves that you have personally read and replied to the transaction through email. However it is ideal that it should be clearly expressed in such emails that the information communicated are legally binding so that one can be clear that the email itself is a transaction.
• Digitally scanned copy of a handwritten signature – This method serves to be a basic translation of what you would sign normally on paper but instead scanned and attached to an online document as an image. This would be accepted as it is in fact your normal signature just as an image. 
• Using a mouse or touchscreen to draw your signature – A common method of creating an electronic signature is to use a touchscreen to physically draw out your signature straight onto and electronic document. This is commonly used in courier services where digitally drawn signatures are used to prove that you have personally received your items as it is convenient and can be directly accounted for.
• Clicking a button online – Clicking acceptance buttons or confirmation buttons that usually have “terms and conditions” attached to them can serve as a method of signifying an electronic signature, as you are able to confirm your transaction by personally clicking the button. This is commonly used in online retail platforms.

Cases where electronic signatures are commonly used in Singapore

With respect to Singapore, business and individuals can use electronic signatures to create legally binding documents. Here are some commonly used transactions and agreements:

• Commercial agreements between organisations
• Consumer agreements such as sales terms and conditions, purchase orders etc.
• Employment contracts and other HR related documents
• Software licensing agreements
• Copyrights and patent licenses
• Trademark licenses
• Service agreements

Cases where electronic signatures cannot be used

The ETA states that there are certain documents that have to be signed traditionally and not electronically. These documents will not be able to have a legally binding electronic signature and examples are as such:

• Wills
• Negotiable instruments, documents of title, bills of exchange etc., that entitles a beneficiary or bearer to claim the delivery of goods or a payment of a sum of money
• The declaration or enforcement of powers of an attorney
• Legal actions or contracts of sale or disposition of real estate