Should entrepreneurs incorporate? If so, should they incorporate early? For entrepreneurs who want to launch and execute their business idea in Singapore, a corporate entity is substantial. Thus, the corporate entity must be set up properly in a timely manner. Furthermore, the entity is one of the first decisions the entrepreneurs have to take because the decision will affect the amount of taxes, the image of their business among suppliers and clients, the amount of paperwork required, the personal liability as well as the ability to loan and expand the business.
Entrepreneurs, either the beginners or the experienced, have 3 options of the business structure including a Limited Liability Company, a Limited Liability Partnership, and a Sole Proprietorship. Of these options, a Limited Liability Company is the most flexible, scalable structure in the country due to its limited liability, tax benefits, professional image and perpetual existence.
Should You Incorporate Early?
Once the type of business structure is decided, the entrepreneurs have to incorporate early in order to take several advantages such as:
- Name Protection. Early incorporation helps protect their company name by registering it as a trademark.
- Legal Agreements. A lot of legal agreements require the signature of a properly established business entity.
- Intellectual Property Ownership. It can avoid disputes about ownership of intellectual property or assets.
- Equity Ownership. Early incorporation. The entrepreneurs can establish an equity stake in the business before value has been built into it.
- Raising Capital. Early incorporation helps raise funding or financing of a business. Usually, investors only provide fund to a properly incorporated business. In addition, many local Banks that offer SME financing products or services only lend to companies, not individuals.
In fact, the ideal time for entrepreneurs to incorporate their business is often questionable. A question like “Should I incorporate my business earlier or later?” often comes up when the entrepreneurs are about to establish and run their business. To emphasize, it is almost always beneficial to incorporate a business earlier than later regardless its business structure. A business that incorporates earlier enjoy the advantages of incorporation to a greater extent.
Are There Downsides to Incorporating Early?
Despite its advantages, it is normal that early incorporation also has some downsides. Its most potential downside is paying state filling fees. In addition, a corporation usually has to file annual reports and pay annual fees. Also, it involves corporate formalities like annual shareholder meetings.
In conclusion, the advantages of early incorporation are higher in number rather than the downsides. Generally, it is far more favorable to incorporate early especially when it comes to the ability to sign contracts or other legal documents in the corporation’s name and to take greater advantages of the limited liability and other benefits. So, using an incorporation service in Singapore earlier should be put into account.