by Singapore Business Solution
Published Tue, Sep 5th 2017, 11:08 | Business
In today’s scenario, there are many who derive business opportunities not only through e-platforms or mobile applications, but also through the conversion of traditional forms of businesses through partnership/sole proprietary firm into more organized forms like the Company/LLP. This Conversion not only helps in having better branding, goodwill of the company; but also helps the liquidity of funds as well as working capital requirement; as Banks/ Financial Institution give more margin money and CC limit to the corporate as compared to firms and the company can have raised money through Venture Capital/Seed funding. Such conversions are a part of business strategy and used to further the objectives of business.
Before planning to convert the company into a LLP, it is necessary that the business entrepreneur has completely studied the financial position of the company and the shares that it would gain in the business market. If the entrepreneur with no financial and marketing knowledge adopts to conversion, it is possible that the company will have to deal with a certain amount of loss. Thus, when the business of the company is thought to adapt to partnered ownership, it is necessary that the business is all set with good returns and profits. IBS Singapore, as a financial consultant for companies, draws plan for business structuring and incorporation, which helps the company to seed its business in the market with efficiency. Along with this service, IBS Singapore also extends the services of winding up and closing down of the company making it a less stressful process. It is mandatory for the companies to study its financial status and IBS Singapore helps the company to understand this with its financial reporting services and financial accounting services in Singapore.
Pro’s of the conversion:
1. Transfer of all the assets and liabilities of the business without paying the stamp duty and capital gain;
2. Liability will be limited to the extent of their contribution in the company. Therefore, the management forego with the unlimited liability;
3. Separate Legal entity of the company from its shareholders and directors;
4. Perpetual session – didn’t dissolve by the death, insolvency or resignation of the shareholders;
5. Easy to sell, transfer, merger etc with the other body corporates
6. Easy transfer of interest is possible as the investment is in the form of shares, whereas in case of partnership reconstitution is required whenever any partner retires or a new partner joins
7. Easy expansion and diversification of business
8. Convenience in getting loan or finance from the banks and financial institutions,
9. Change in shareholding and management possible without disrupting the business,
As every coin has two sides; in the same way, there are also the cons of conversion:
Con’s of the conversion:
· Proper book keeping
· Mandatory audit requirement irrespective of turnover
· Dividend Distribution tax on declaration of dividend and income tax in the hands of the recipient if the amount increases Rs. 10 Lacs.
· Restricted Related party transaction, inter-corporate loans and investments, loans to directors etc
· Increased Disclosures and Compliance requirements
· Has to pay 2% of the net profit in Corporate Social Responsibility; if the net profit of the company is more than Rs. 5 crores.
This article is authored by A. Loganathan, representing India Business Solutions (IBS) which is a boutique advisory firm helping a lot of Start ups in India and Singapore in fulfilling their aspirations. Loganathan is heading the Singapore operations of IBS and can be reached on [email protected]. Website: www.consultibs.sg
For more updates, follow us on Facebook Page.