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Sole Proprietor/Partnership

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Sole Proprietorship

This type of entity is suitable for small businesses that have negligible or no risks. It is owned by one person who is the decisive authority and owns all the assets and liabilities of the business. The business is not separate from the Owner who has unlimited liability. Therefore Sole proprietorship may be the simplest type but it also the riskiest. Foreigner individuals and companies can register a Sole proprietorship but must appoint a local resident manager. Citizens, Residents, Employment Pass holders can register a Sole Proprietorship.

Merits

  • Quick, easy and least expensive to set up
  • Easy to administer and manage because of undivided authority and control
  • Less administrative duties, on going compliance requirements
  • Must renew registration annually
  • Easy to close

Demerits

  • Owner is identified with the business hence is susceptible to legal actions taken against the business
  • The owner’s assets are at risk since owner is responsible for all debts and losses
  • Earning are charged at personal income tax rates and is deprived of incentives offered to companies
  • The business ceases with the death of owner therefore not perpetual and identified with the owner hence not transferable by part
  • This type of business carries an inferior image due to lack of vision or commitment to grow, excessive control in one owner and a certain inhibition to expand therefore fails in attracting quality talents and commercial partners
  • Raising capital through loans from institutions or investors is difficult due to inferior image and dependency on sole owner

Partnerships

Partnership setup seeks to address certain inherent drawbacks in the Sole Proprietorship setup. In this it is possible to get a pool of capital, talent and strategic assets based on mutually agreed terms. There are three types of Partnership setup.

Partnership is a business formed by 2 to 20 persons. This is suitable for low risk, low profile businesses. Other than pooling of funds and strategic merits of the partners the setup offers no significant advantage. It has all the disadvantages of the sole proprietorship and the partners have unlimited liability and earnings are taxed at the partner’s personal tax rate. Citizens, Residents, Employment Pass holders can register a General Partnership Firm. Foreigner individuals and companies can register General Partnership Firms but must have a local manager.