Topic 6: Business Organizations (~3-5 Qns)

Key Points:
1.Types of Business Organizations:
(i)
Sole-Proprietorship
- A business owned by 1 person or 1 company. The sole
proprietor has full & final say in the running of a business.
There are no partners in the sole-proprietorship
- The sole-proprietor is not a legal entity
- Cannot register another sole-proprietorship or partnership
under the name of the primary sole-proprietorship or
partnership
(ii)

Partnership
- A business formed between 2 to 20 people. If there are > 20
partners, the business has to be registered as a company
under the Companies Act, Cap 50

(iii)

Company
- A business registered under the Companies Act. It has a legal
responsibility
- Has rights to its own property, perpetual succession & can be
sued in its own name
- Usually has words Pte Ltd or Ltd as part of the name
- Shareholders own the company and directors manage the
company
- 4 Types of Companies:
Exempt Private Company (wholly owned by the
government; not more than 20 shareholders, none of
whom is a company)
Private Company limited by shares (locally incorporated
company where max no. of shareholders = 50)
Public Company [listed company] limited by shares
(locally incorporated company with > 50 shareholders;
offers shares to the public to raise capital)
Public Company limited by guarantee (non-profit
organizations such as charities)

(iv)

Limited Liability Partnership

- A corporate body with a separate legal entity from the partners
- Partners can operate as a partnership while having a separate
legal identity from a private limited company
- Can sue & be sued in its name
- Partners will not be held personally liable for business debts of
the LPP
- Partner may be personally liable for claims of losses resulting
from his own wrongful act or omission but will not be held

(v)

personally liable for wrongful acts or omissions of any partner

of the LPP
Has perpetual succession (any change in partners of a LLP will
not affect its existence, rights or liability)
Can acquire & hold property in its name
Have a common seal in its name

Limited Partnership
- Partnership consisting of a min. of 2 partners with no cap on
no. of partners
- At least 1 general partner with unlimited liability & 1 limited
partner
- General Partner:
Responsible for actions of an LP & be liable for all debts
and obligations of LP
Responsible for filing transactions
- Limited Partner:
Can be local resident or residing outside SG
Not liable for debts & obligations of the LP beyond his
agreed contribution, provided he does not take part in
the management of the LP
If no limited partner, LP registration will be suspended &
the general partner will be deemed to be registered as a
sole-proprietor or partnership. Once a new limited
partner registers with ACRA, the LP registration will be
restored & sole-proprietorship/partnership will cease
- General or limited partner can be an individual (at least 18
years old) or corporation
- IF all general partners are residing outside SG, NEED to
appoint a local manager
- No perpetual succession
- Does not assume a separate legal entity from the partners (i.e.
if general partner convicted of criminal offence, limited partner
will be culpable as well because seen as 1 corporate body)

2.Governing Laws:
- Sole-proprietorship --- Business Registration Act
- Partnership --- Business Registration Act
- Companies --- Companies Act
- LLPs --- Limited Liability Partnership Act 2005
- LPs --- Limited Partnerships Act 2008
NOTE: ACRA is the governing body
3.Business Registration Act:

Every person shall, before carrying on business in SG, make an

application to the Registrar in the prescribed manner for registration
under this Act
Min. age = 18 years old
Will include blogshops
Exceptions:
Hawker
Craftsman
Taxi Driver
Professionals conducting their own professional business (e.g.
doctors, lawyers)
Penalty: Fine not exceeding $5k &/or imprisonment not exceeding 12
months
Business Registration Process: [NOTE: Business Registration followed
by License Approval]
Business Name (cannot be undesirable or identical to that of
any business/corporation)
Nature of Business (can only select 2 options; will affect quota of
hiring people)
Principal place where business is carried on (Home Office
Scheme require approval from URA/HDB) [NOTE: P.O. box
address CANNOT be used as business address]
Identity of every person in the management of the business
Date of commencement of business
If business is a corporation, corporation name + registration
number + registered office
ACRAs Powers to refuse or cancel registration
Where the business has ceased to carry on, to inform Registrar within
14 days of cessation
Change in registration particulars: to inform Registrar within 14 days
after change, with fee of $20 payable
Penalty: Fine not exceeding $5k &/or imprisonment not exceeding 12
months
Any person who carries out a business that is unlawful (e.g. opening a
shell company), the registration shall be cancelled
Implications of non-registration:
Rights of the person who did not register will not be enforceable
Would have to apply to court for relief or permission to enforce
the rights
Validity of registration = 1 year from date of registration
Must be renewed annually with renewal fee of $30

4.Termination vs Cessation of Business: (file a note of

termination/cessation)
-

Termination
Any date before expiry of registration
Can be filed any time before or after
the expiry of registration
Requires endorsement of all partners
Fee of $20 payable

Cessation
Date of cessation must be on or after
the date of expiry of registration
Can be filed only after the registration
has expired
Can be filed by either the soleproprietor or by any partner
No fee payable

5.Conduct of Business:
- Business carried on by local manager
Scenario
Appointment of Local Manager
(Sole-proprietorship) Sole-proprietor Compulsory
is a foreigner
(Sole-proprietorship) Sole-proprietor Optional
is a SG citizen or PR & resides in SG
(Partnership) All partners are
Compulsory
foreigners
(Partnership) At least 1 partner is a
Optional
SG citizen or PR & resides in SG
(Where the soleproprietorship/partnership is owned
by a foreigner or local company)
Compulsory
All the directors are foreigners
At least 1 director is SG citizen or PR
& resides in SG
-

Optional

Restriction: Any person who, being an undischarged bankrupt (in SG or

overseas) cannot take part in the management of any business w/o
permission of the High Court of permission of the Official Assignee
Penalty: Fine not exceeding $10k &/or imprisonment not exceeding 2
years
Name Approval Fee (one-time) = $15
Business Registration Fee = $100

6.Partnership:
- Property:
Property originally brought into the partnership, acquired by
purchase or otherwise, must be held and applied exclusively for
the purpose of the partnership
Property bought with money belonging to the firm is deemed to
have been bought on account of the firm

If a partner misappropriates or uses partnership property for his

own use, the other partners can make him accountable of the
profits
No majority of partners can expel any partner unless power to do has
been conferred by agreement between ALL the partners!
Continuation of fixed-term partnership (if not new agreement, rights &
duties to remain)
If no fixed term agreed, partner may give notice of intention to retire
from partnership to all other partners
If partnership constituted by deed (contractual), partner may serve
notice of retirement from partnership in writing
Interests & duties of partners may be varied by an agreement
Profit & Loss (all partners to share equally; firm must indemnify
every partner for personal liabilities)
Every partner may take part in management of partnership
business
No partner shall be entitled to remuneration for acting as partner
Introduction of new partner requires consent of all existing
partners
Differences to matters: may be decided by majority of partners but no
change may be made to nature of partnership business w/o consent of
all existing partners
Book-keeping:
Kept at place of business or principal place
Every partner may have access, inspect & copy any books
Partners to render to any partner, true accounts & full
information of all things affecting the partnership
Competition with firm:
Cannot carry on business of same nature & competing with the
firm w/o consent of all other partners (conflict of interest)
Must account for & pay over all profits made by him in that
business to the firm
Every partner is an agent of the form & his other partners
Liability of firm for wrongs (firm liable for any wrongful act or
omission by a partner that causes loss, injury or penalty)
Misapplication of money or property (firm liable to make good
the loss if 1 or more partner misapplies the money or property)
Liability for wrongs joint & several (every partner is liable jointly
with partners or severally for everything for the firm)
New partner not liable to the creditors of the firm for anything done
before he became a partner
Retired partner still liable for partnership debts or obligations incurred
before his retirement

7. Companies:
- Requirements of a Company:

Director must be at least 18 years old

SG citizen/PR/Entrepass holder (NOTE: if you are a foreigner &
want to set up business in SG, need to apply for Entrepass)
At least 1 director
Foreigner must register with local director
No requirement for authorized capital
Self-incorporation allowed
Registration Fee of $315

Roles of Shareholders:
Invest in the company
No power to manage the company
Appoint & remove directors by ordinary resolution
Attend meeting & vote at AGMs & EGMs
Access to information from the company
Fair treatment for all shareholders

Directors:
Appointed by shareholders in the General Meeting. Directors
must consent in writing to act as directors
Responsible for the management of the company (must declare
interest + CANNOT authorize company to lend money to
themselves, family or interested companies except exempt
private limited companies)
Requirements:
o Natural person (i.e. with sound mind, fit) of full age &
legal capacity
o No age limit in private limited companies
o Age limit of 70 for public limited companies
o Cannot be an undischarged bankrupt or convicted of any
offence involving fraud/dishonesty in SG or elsewhere
Responsibilities:
o Need to carry out duties honestly
o Cannot improperly use information obtained as an officer
of the company to profit, directly or indirectly an
advantage for himself or any other person
o Appoint a corporate secretary with relevant knowledge &
experience (must be a natural person residing in SG +
ensure compliance of various administrative matters
required under the Companies Act)
o Hold annual general meetings (AGMs) 1st AGM within
18 months from date of incorporation; subsequent AGMs
once every calendar year but not later than 15 months
from date of last AGM

o Present accounts at AGMs (NOT later than 6 months

from date of AGM)
o File annual returns within 1 month from date of AGM
Removal of Directors:
o May voluntarily resign
o Remove by ordinary resolution
o Automatic removal due to certain events (e.g.
misconduct; criminal offence)
Closing of Company:
(i)
Winding Up
Voluntary winding up by members/creditors (company solvent;
assets sold & paid to creditors; balance returned to
shareholders)
Compulsory winding up by Court (company insolvent; court
appoints liquidator to wind-up company; balance owed to
creditors written off)
(ii)

Striking Off (cease the business even though theres nothing

wrong with it)
Application Fee = $35
Processing time = about 6 months
3 criteria before striking off:
1. Ceased business operations
2. No remaining assets & liabilities
3. No outstanding tax liabilities

8. Limited Liability Partnership

- Requirements:
Min. of 2 partners with no cap on number of partners
Partners must be 18 years and above
Partner can be natural person or corporate body (local/foreign
company; another LPP)
Must have at least 1 manager (responsible for filing online
transactions)
o Natural person of full age at least 18 years old
o Local resident
o Not bankrupt
o Not disqualified under Companies Act
o Not disqualified as an unfit manager of insolvent LLP
o Not disqualified to act as manager of former LLP wound
up on grounds of national security or interest
o Not convicted of offences involving fraud/dishonesty or
other offences connected with the formation or
management of a LLP & disqualified as a manager
Keep accounting records, profit & loss accounts and balance
sheets that explain the transactions and financial position of the

9.
-

LLP---If LLP doesnt do this, the LLP & every partner shall be
prosecuted and penalty is a fine &/or imprisonment
Submit to the Registrar an annual declaration of solvency or
insolvency which will be made available to the public
1st annual declaration within 15 months from date of registration
Subsequent declaration once every calendar year in intervals of
not more than 15 months

Fees:
Name Approval Fee = $15
Registration Fee = $150
Conversion to LLP:
Existing Partnership (existing partners need to be partners of the
new LLP)
Existing Company (all shareholders need to be partners of the
new LLP + existing company must have no outstanding
debts at time of conversion application)
Conversion fee = $100
Closing a LLP (SAME as closing a company!)
Limited Partnership:
LP registration valid for 1 year
Renewal fee = $20
2 options for closing of LP:
(i)
Cessation
Applicable for live LPs + LP registration expired & not
renewed
Notice to be submitted by general partner
(ii)
Dissolution
Applicable for live LPs only
Notice given by general partner with payable fee of $10
Expiration of partnership term
Bankruptcy or death of any general partner
Court Order
Any event that makes it unlawful to carry on the business