Upon entering Singapore’s business arena, you will be introduced to a variety of business entities you can choose, two of these choices are sole proprietorship and business partnership agreement. Taking a better look at the differences between these two business entities will help you in making an informed and advantageous decision. In order to get a clear view of everything, their differences will be presented into four categories. Hopefully, after reading them, you can choose the one the best suits your desired outcome.
The biggest difference between a sole proprietorship and a business partnership is ownership. A sole proprietorship type of business is owned solely by a single person. All decision making power is vested upon that owner, and the business is not seen as a separate legal entity from the owner.
As a sole owner of a business you have absolute freedom to make business ventures and critical decisions for your business, you don’t have to worry about having to convince a board of members. And you also don’t have to concern yourself with making lengthy annual reports concerning your business because you are your own boss.
A business partnership, on the other hand, is owned by two to twenty partners. Since it is not owned by a single person only, meetings and agreements between the members are necessary before a decision can be made. Similar to a sole proprietorship, a business partnership is also not recognised as a separate legal entity.
Being a co-owner with different people means that your degree of control wanes with every co-owner you have. You can’t make decisions for the business without first conferring with them, and business ventures equate to a thorough business plan that needs to be presented to your business partners before even taking the first step.
Registering as a sole proprietor or as a business partnership is relatively easy, you just need to be eighteen years old or above, a Singapore citizen, or Permanent Resident in Singapore, or an EntrePass holder. Other requirements include topping up their Medisave account with CPF Board. If the name you choose for your business matches yours directly, example Ramon Hong and your brand name is Ramon Hong; then you do not need to register the name to the Accounting and Corporate Regulatory Authority (ACRA). The cost of registering a business as a sole proprietor or as a business partnership actually costs the same, just $115 for one-year registration and $175 for three years.
For sole proprietorship and business partnership, the liabilities are the same, they are both exposed to the risk of unlimited liability, wherein should the company fail the personal assets of the owners can be a risk. But, there is a difference in how this liability can affect the owner, a sole proprietor is at a disadvantage because should the business fail he or she has to carry the whole burden by himself or herself. Being in a partnership, on the other hand, offers the security of minimising the financial damage done because of the number of people involved. A 5 million investment is a big deal for a single person but 5 million divided among five people becomes less heavy, since each person only has to contribute 1 million each to arrive at the amount.
Two business partner working hand in hand to fund a business is more likely to get better capital than a sole proprietor, but then again a sole proprietor doesn’t have to ask someone else with regards to how his or her money is spent. Either way, finding capital and funding for a sole proprietorship and a business partnership can be tricky and more difficult than compared to a limited partnership or a limited company.
A sole proprietorship and a partnership agreement each has its strengths and weaknesses as a business structure, and the success of each platform depends on how well you can handle your business and the problems that might possibly come in the future.