So, you have an incredible business idea. You now want to make this intangible idea produce tangible returns. However, you just do not know where to start! Well, this article will shed some light on the various legal issues start-ups in Singapore should look out for and point you in the right direction, starting with your recommended business structure.
There are various types of business entities you can register to start your business – sole proprietorship, partnership, limited liability partnership, limited partnership company and private limited company. Irrespective of the type of entity you register, all of them are governed by the Singapore Companies Act and they have to comply with the Inland Revenue Authority of Singapore (IRAS) and Accounting and Corporate Regulatory Authority (ACRA) rules and regulations.
Registering a private limited liability company is the most popular route taken by start-ups in Singapore. There are many reasons for this – the security of limited liability in the event the business fails to flourish, no requirement for any substantial capital requirements, the ease with which one can set up a new company in Singapore and the ease with which new investors can be brought into the company. Private limited liability companies also enjoy certain tax benefits.
Protecting Intellectual Property (IP) Rights
The protection of your brand name, inventions, designs, symbols and images used in commerce all fall under IP laws. The intangible nature of IP makes it unique compared to other forms of property. Although you can gate your house to prevent others from entering, what can you do if another company tries to use your unique brand design? Proper registration will give you the right to stop others from using identical or similar designs, reducing counterfeits at the same time.
Aside from that, another reason to secure your IP rights is to use it as a foundation to build your brand. Trademarking your brand name or design will allow you to use it for marketing any product or service, significantly increasing awareness towards your brand, making marketing easier for you. This in turn adds value to your company as investors usually pay for goodwill of a brand.
Once your company is registered and its IP is protected, your start-up needs to comply with various corporate rules, practices and processes to stay within the boundaries of the law. Below is just a basic summary of some aspects of corporate governance for your business.
Annual General Meeting (AGM): The Companies Act dictate that Singapore companies must hold an AGM once every calendar year to present its financial accounts. The first AGM should take place within 18 months from the date of incorporation. Any changes you make to your company structure at the AGM such as a change in the shareholders, change of directors, company name change, change of address, etc. must be lodged with ACRA – within 14 days in most cases.
Accounting Standards: All Singapore companies must comply with the Singapore Financial Reporting Standards (SFRS). Small or medium-sized business can just follow the ‘SFRS for small entities’ (set up by the government) which is a set of streamlined compliance requirements to ease the burden on small businesses.
You are required to keep your business records and accounts for a period of at least five years. Otherwise, there could be financial penalties.
Legal & Regulatory Compliance
Other than corporate governance, there are also legal and regulatory guidelines to follow when managing your business.
Click here to continue reading part two of this article on your legal checklist for start-up success. If you would like to receive legal advice on setting up your business, protecting your IP rights, drafting the relevant contracts required for your business or on compliance issues, please approach our experienced and affable team at AT Law Practice LLP – click here.
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