ISSUES TO CONSIDER WHEN STARTING A NEW BUSINESS

In Singapore, companies have a legal standing as humans, they are separate entities which can legally own property / shares, can sue and be sued.  Therefore, when starting a new business venture or project, it is important to carefully consider some main issues to ensure you have taken the necessary steps to protect yourself and your new business:-

1 Choosing the type of business entity

A start-up must decide on the type of legal structure or entity that the company will be; to incorporate or to remain as a sole proprietorship. Many entrepreneurs choose to postpone incorporating their companies to save costs, while the delay may also create legal risk.  

Incorporating a company early offers significant advantages for founders and subsequent partners. An incorporated entity provides liability protection and tax savings through benefits and deductions that are not available to sole proprietorships or partnerships. Additionally, if you are looking for investors, an incorporated entity is more attractive to investors given the limited liability and transferability of shares.

2. Location of incorporation

The commercial laws of each jurisdiction vary wherever you chose to incorporate your business. Each country has a different set of rules which will directly affect tax, running costs, and essentially how the business will be governed. Making this decision is perhaps the most vital for your company. As with any new business, it is always logical to either incorporate in the country that you currently reside in, where your main operations exist or elsewhere that have tax and cost benefits.

 By choosing to do business in another jurisdiction, you inevitably become subject to that jurisdictions’ company laws and legal regulations, which must be adhered to in order to keep the company in good standing. Many business owners will simply choose to incorporate in the country where their main business processes are carried out. Although this may be the simpler option, depending on where they are located, it can mean a slow incorporation time and excessive audit requirements that can be burdensome to comply with. 

If you can afford the incremental cost, relocating may be a wise business move. You may also want to consider whether an offshore parent company structure would be beneficial.

3. Naming the company

If you are looking to incorporate a company in Singapore, the name cannot be the same or similar to another entity on the company registrar’s directory. Unless you are functioning as a sole proprietorship under own name, you will need to register your business name with The Accounting and Corporate Regulatory Authority of Singapore.

4. Structuring the Company

It is important to have a sound understanding with your co-founders regarding the terms of your business arrangement.  So much time is spent in court room around the world resolving business relationships that were poorly planned or documented.

A Shareholder Agreement is a great way to document a business

Most disagreements can be avoided through shareholders’ and other control agreements.  A clear line of responsibilities, rights and expectations can help the understanding of what may happen in the event of certain contingencies or issues arising.

As the company grows in size and value, the founders have a greater interest in protecting against death, fallouts or other unforeseen events.  There is always good to have a shareholder agreement in place as part of contingency planning.

5. Protection of intellectual property

Most companies have intellectual property (IP) which is used to create and store the value of the company. This intellectual property may include copyrights, patents, trade secrets, trademarks or even domain names.

Discovering a way to protect these intellectual property rights early can be critical to the value of your company. This can be achieved by all company founders assigning their intellectual property to the company and renouncing all moral rights for their work on the company.

A sound portfolio of intellectual property rights can build and secure value in your company. It will also protect the value of the company, making it more attractive for potential investors.

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