JonnyD84 wrote:Hi,
I know there has been lots of information posted, but I can't seem to find exactly what I'm looking for and hoping someone point me in the right direction. I have been living in Singapore for a number of years, and recently converted from EP to DP. I am interested in starting a company with the help of close acquaintance who is on a PR, but she would not be handling day to day management - she's more interested in only investing or helping register the company. Is it better to...
a) Register a company with me as the owner, her as the director. But then I'm not sure how the LoC works? And I think I'd have to engage the services of a filing agent
b) She registers the company and herself as the director, and then I work off of LoC.
We'd work out the exactly how any profits etc. are split up, and document it, but I'm not to worried about that part. It'd be a small business, not sure if that makes a huge difference.
Is there an easier way to set this?
Thanks!
Do a search on my handle. You will find many posts related to DP's starting a business. You will learn a lot of the nuances be reading related posts. In your situation:
a) Your PR friend starts a sole proprietorship. She is the owner. She files for a LOC for you to work in the company. You get paid a salary. She reports the income from her SP on her personal tax return. If the expenses of the business equal the income (for example, you get paid all the profits), then she pays no tax. This is probably the cheapest route but the owner of a sole proprietorship has all their personal assets at risk, should the SP be sued, so she probably won't want to do that.
b) Your friend registers a company, a private limited. You can be the sole shareholder, ie, owner, but you cannot be the director. She is the director and she will file for a LOC or EP for you, probably a LOC if you aren't going to make enough money to qualify for an EP. If you get an EP, you can become the director; it is my understanding that MoM/SCRA will not permit someone to be a director under a LOC... you'd have to test the waters.
Your friend can achieve financial participation in the company either by investing in stock and becoming a shareholder or by making loans to the company. If you wish to split profits via dividends they must be split in the same percentage as stock ownership. If she provides a loan, you can set any kind of terms for payback. You can also pay her a variety of fees for services, or directors fees, as a means to have her participate in the profits.
You should have a somewhat better chance of getting a LOC than the average joe since you have a PR forming the company and technically managing it. Your application for LOC will be an arm's length transaction. It is still not guaranteed, though, unless you can convince MoM that you know what you are doing.
Your friend should be aware that she holds legal responsibility for the actions of your company, both civil and criminal. If you do something illegal, or file bankruptcy, it is the director of the company that is liable. This is why people generally don't get involved in other people's businesses unless they know them well and trust them.
