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Where Legal Is Integral

Entreprenuers could do well to familiarise themselves with the laws relating to their business. Entrepreneurs in the Asian region have been known to say this about Singapore: In terms of an enhanced business environment, you cannot have it any better. The systems and infrastructure are there for the utmost efficiency and success of any small or medium business.
But with that efficiency, there is no room for playing fast and easy with the rules. In a number of cities in Asia, setting up an enterprise can sometimes mean making deals under the table and paying off the bureaucrats. That's just considered part of the business. Not in Singapore.

While you are very likely the expert on the product or service you offer your customers, you may know little about the laws that regulate this type of business. A general understanding of business law will always be useful to an entrepreneur whether he's only just set up his business, or whether his company has already been in operation for a few years.

Entrepreneurs, for example, should do what they can to protect their intellectual property - by registering their company name and logo. Legal expenses can run into thousands of dollars. Nanz Chong-Komo, managing director of the One.99 one price discount shopping outlet, lost her court case against another store called Lifestyle 1.99, which she claimed made it confusing for customers. Although Ms. Chong-Komo won the case in the High Court, it was turned over in the Appeal.

Businessmen should also learn the basics of contractual laws, the major employer-employee laws, as well as the security laws that affect financing and the governmental regulations for their particular industry. Corporate lawyers suggest referring to books like Goh Tianwah's Handbook For Businessmen (Rank Books 2000) or Sia Suat Hwa's Business Firms & Companies (Times Books 1996) as a good start.

Organisational Structures

What shape, form or structure will your business operation take?

A business is a legal entity, and it can take a number of forms. As an entrepreneur, you may establish a corporation, a sole proprietorship, a partnership or a limited liability company. Each of these structures offer entrepreneurs specific advantages as well as disadvantages, so you will have to determine which will be the most appropriate structure for your business.

Among the concerns that need to be weighed and balanced are the need for ease of management, the protection of personal assets, and the costs of running the organisation.

A sole proprietorship is the simplest and most common form of business ownership. What's more, it is easy to establish, simple to manage and as a sole proprietor, you have full and complete control over all aspects of business and you do not need to submit an annual report. An applicant for a sole proprietorship in Singapore must visit the Registry of Companies and Business at 10 Anson Road, fill out the appropriate forms and pay the fees for the "Certificate of Registration."

However, as a sole proprietor, you alone are responsible for the debts and liabilities of your business. There is no distinction between your business and you as an individual. Which means, that in the unfortunate event that your business should fail, as a sole proprietor, your personal assets are at risk.

A partnership is also a fairly manageable option. In this case, the important issue from a legal standpoint, would be documenting the roles and responsibilities of the partners involved. Matters to be clarified would include the amount of capital each partner will provide, the management role each partner will fulfil, what happens if a partner leaves the business or wants to sell his/her share, and what happens if a partner dies.

A corporation or a limited liability company avoids that possibility and greatly reduces the entrepreneur's risk. Of course, these structures are generally more complex, and therefore require more in terms of corporate records and company documentation as well as taxation.

In Singapore, incorporating a company demands certain requirements. At least two directors are necessary, and one of those directors must either be a Singaporean, a Singapore Permanent Resident or a Singapore Employment Pass Holder. Every company must hire one secretary within one month after incorporation, and an auditor must be hired within three months.

Because a corporation is a separate legal entity from the individuals who own or operate it, generally, you can't be held personally liable for business debt or court judgements against your business. Your business must be structured as a corporation if you hope one day to attract investors through a public offering. If a stockholder dies or wishes to sell out, the corporation will continue to exist and do business. In the matter of taxes, fringe benefits can be deducted as business expenses on the corporation's tax return.

Legal Mistakes

Avoid the mistakes that other small businesses have made in the past. Lawyers advise familiarising yourself as much as you can with the necessary forms that are related to your particular business. Says Andy Chee, a lawyer with experience in business law: "In many cases, most businessmen are simply unaware of the rules and regulations." Mr.Chee refers to the details of notifying the proper authorities about changes that arise in the course of doing business.

"Frequently, it's the directors who get into trouble - because directors are responsible for the running of the business or company, however they don't own the company." Mr. Chee says that often, entrepreneurs run into difficulty with smaller things. For instance, if one of the directors changes residence, the company must inform the Registry of Companies within a specified time, otherwise, the company will be in breach.

Another common occurrence, says Mr. Chee, is when directors of a company are under the mistaken notion that they own the business. "A company cannot lend money to its directors, unlike in a sole proprietorship or partnership."

Mr. Chee acknowledges the complexity of the laws, but notes that the Companies Act is being revamped in parliament currently, and it is hoped that the revised version will be simpler and more user-friendly for entrepreneurs.

Legal Issues For Internet Businesses

Traditionally conservative, the government has attempted to refrain from heavy-handed regulation in the realm of the Internet and only enforces content control to a limited degree. Internet companies must submit to the Singapore Broadcasting Authority (SBA) Notification 1996 and must register with the body for a class license notification if they provide content for business, political or religious purposes. These companies must follow an Internet Code of Practice, ensuring that contributions to their sites conform to the regulations and circulate content that is not "objectionable."

The SBA may object on the grounds of "public interest, public morality, public order, public security, national harmony" or because the content is otherwise prohibited under Singapore laws. Objectionable material includes material showing nudity or genitalia, violent sex, explicit sex and child pornography. Material depicting extreme violence or cruelty, and material that incites or endorses ethnic, racial or religious hatred, strife or intolerance is also prohibited. Naturally, industry self-regulation is hoped for and encouraged.

"This article was contributed by Christopher Lai, Director-Head of Business Development, Small Business Services, CSG, American Express International Inc."

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