Due to the fluctuations in income and the uncertainties of business, business owners have different financial planning needs compared to the typical employee.
Types of business structures
There are 4 main types of business structures in Singapore. They are:
- Sole-Proprietorship (one owner) or Partnership (two or more owners)
- Limited Partnership (LP)
- Limited Liability Partnership (LLP)
- Company
One of the most common type of business structure is the Partnership.
A Partnership is owned by two or more owners, who are personally liable for partnership’s debts and losses incurred by other partners.
The main advantages of a partnership include pooling of capital and expertise of the respective partners.
Most business partnerships incorporate themselves into a Private Limited company when the business becomes successful, in order to reduce the liabilities they could be exposed to.
However, there is a major drawback of forming a partnership – the death of any one partner in a partnership may cause business disposition and continuity problems. It could potentially cause a break-up of the business, unless it has ready buyers in the surviving partners who want to continue the business.
If that is the case, special arrangements should be made in advance, to re-organize the business using a Funded Cross Purchase Buy-Sell Agreement, and specify the terms and conditions of the sale and transfer of the business to the surviving partners.
To learn more about Buy-Sell Agreement, and Business Succession planning, contact your FLA Organization financial planner for more information today.
