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Drop-Shipping v eCommerce. Which is better?

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DROP-SHIPPING v ECOMMERCE. WHICH IS BETTER?

Drop-shipping and eCommerce are still two popular ways to make money online.

However, understanding the differences between the two is vital before selecting which one is best for you.

DROP-SHIPPING

Drop-shipping is a way to run an eCommerce business without all the work of setting up a website and maintaining an inventory. For example, when a store owner receives an order from a customer, they contact the supplier and have the supplier ship the product directly to the customer.

Pros of a Drop-shipping Business:

1.  Low Start-Up Costs: Since you don’t require inventory, your only costs are domain name, hosting, customer support, and marketing. Drop-shipping businesses have low costs, making them low-risk investments.

2.  Speed: Fast start-ups are crucial in every market, especially eCommerce. To enhance sales, shoppers must trust that things will come fast. You can miss out if you wait too long to buy a hot new product. Drop-shipping is a terrific approach to test your niche and top-selling products quickly.

 

Cons of Drop-shipping Business:

1.  High Competition: Many businesses with low start-up costs have jumped on the drop-shipping bandwagon. Although the overall opportunity is viable, it can make standing out and attracting customers to your site more challenging.

2.  Low Margins: Overall, the possibility is still highly viable, but low-margin items leave little tolerance for error. Say you must charge more for your product to cover shipping and delivery. Then, your product may not be market-friendly.

3.  Less Control: You have less control over the quality of the products you’re selling, and there can be longer shipping times.

 

ECOMMERCE

eCommerce businesses are more traditional businesses that sell products directly to customers online. This can be done through various platforms, such as online stores, auction sites, or even personal websites.

 

Pros of an eCommerce Business:

1.  Better Brand Control : You control the image and message of your business, as well as how your business is presented to the public. This means you can hone in on a specific niche or market and craft a brand that’s unique and authentic to you.

2.  Greater Profit Margins : Since you’re not dealing with consignment or drop ships, you keep 100% of the money from your sales. This means that you have zero margin for error — but when done right, the profits are significant.

3.  Easier to Build Trust : Building trust with your customers is easier to do with an eCommerce business since you sell them the product. If you can build that trust, your customers will be more likely to buy from you again in the future.

 

Cons of an eCommerce Business:

1.  Expensive to Get Started : An eCommerce site can cost a lot to set up correctly. This includes software costs for your website and expensive payment processors. As a result, an eCommerce business can be expensive to launch but less expensive and more scalable than a traditional business model.

2.  Harder to Scale : You can’t readily add staff or contractors since you manage everything. As your firm expands, you’ll have to do more yourself, which can be difficult as you must learn to do everything. An eCommerce firm can grow, but it gets harder once you approach your scaling limit.

3.  Harder to Make Sales : You’ll increase sales with an eCommerce business as you improve your brand and marketing talents. However, there is a cap on how many sales you can make daily (since it’s a solo effort). This cap is reached sooner than an eCommerce business’s per-day sales limit.

 

There is no right or wrong answer when choosing between drop-shipping and eCommerce. Both business models have pros and cons, and choosing one will ultimately depend on your preferences, goals, and experiences.

Drop-shipping might be the better option if you’re starting, as it’s generally lower risk and requires less capital.

However, if you’re looking to scale your business quickly; eCommerce might be a better option, as it offers more control over the customer experience and allows you to build a stronger brand.

Ultimately, the best solution for you will depend on your specific business goals and needs.

Every business is different. As such, the difficulties that you face will vary. We offer video consultation via Lawyer Anywhere and can help you navigate the ups and downs of starting and running your own company.

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8 Amazing Questions Every Business Owner Should Ask

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8 AMAZING QUESTIONS EVERY BUSINESS OWNER SHOULD ASK

The majority of entrepreneurs enjoy creating businesses based on their hobbies or interests. However, because business owners are not legal experts, start-up legalities may be annoying and perplexing. Corporate compliance, intellectual property laws, taxes, rules, and corporate liability are just a few legal issues that will arise as the company grows.

Of course, it’s best to consult a lawyer about your company’s needs, but knowing what to discuss helps.

The best way to save on legal bills is to avoid problems in the first place. Here are 8 conversation-starting questions which may be vital for your business’s growth and success.

1.  Why Is It Essential To Keep Business Records?

Small businesses must keep all tax receipts and paperwork. Depending on your business, some contracts may limit your liability if you are sued. Some of the other paperwork your company generates may be useful in the future because it demonstrates how well it is growing. So, talk to your lawyer about what company records to keep. Keeping accurate records from the beginning is easier than searching for them later.

2.  What Are My Risks of Getting Sued As A Small Business Owner?

Some businesses are more likely to be sued (for example, running a skydiving business will be riskier than working as a freelance blogger). A lawsuit could be filed for a variety of reasons. For example, contract disputes are a common source of business liability.

To determine your chances of being sued, you should learn how you could be held legally and financially liable. These risks should then be reduced or eliminated. You should consult a lawyer about these liabilities unless you have legal training.

3.  Can I Use Personal Assets In Running My Business?

Many small business owners do not draw a line between what is personal and what is business. Your business is a mix of your passions, hobbies, and profession.

Keeping business and personal assets separate is difficult but necessary. Even seemingly simple behaviours, like buying office supplies with your credit card, might threaten your assets. If you consider your personal and corporate identities being the same, why wouldn’t a creditor or court?

4.  How Do I Find Investors?

Investors may be interested in your company if it has growth potential. Investors provide small businesses with capital, connections, and information. Accepting investors is not something to be taken lightly. You must understand how the rules for receiving money will affect your business and your freedom as a business owner.

5.  What Qualities Make A Company Attractive To Work For?

Most workers want more than just a good wage and job security. Employees do better when they are provided freedom and respect space. An excellent dynamic employer-employee relationship starts with good leadership. Work with your lawyer to establish best practices before recruiting new team members. This involves clear HR regulations, the necessary paperwork (independent contractor and employment agreements, non-disclosure agreements, termination letters, etc.), and following up with each employee.

6.  How Can I Protect My Brand?

Your company’s reputation is its most precious asset, regardless of industry. Protect your brand from competitors and copycats. A lawyer can register your company’s brand name, logo, and other identifiers. They can aid with brand infringements.

7.  How Do I Ensure That My Business Is Compliant?

Every company must follow the rules and regulations of the country. If you break these laws, you could face fines, penalties, company liability, and personal liability. How do you know which laws affect your business? Without experience, it’s hard to tell if you’ve overlooked a law or rule. The regulations that apply to your business depend on the business entity you chose, where you formed it, and where you do business. If you want to ensure that your company is compliant, consult your lawyer.

 8.  How Do I Make Plans for My Family?

Many small business owners hope to transfer their company or its assets to their family eventually. However, depending on the structure of your business (and your family), this may not be as simple as you believe. A lawyer with experience in estate planning can assist you in ensuring the security and transferability of your business to your family.

Every business is different, and as such, the difficulties that you face will vary. We offer video consultation via Lawyer Anywhere and can help you navigate the ups and downs of running your own company.

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How to Start Your Own Registered Fund Management Company (RFMC) – Quick Answers

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HOW TO START YOUR OWN RFMC – QUICK ANSWERS

Do you have any questions about launching your own Registered Fund Management Company (RRFMC)? 

To assist you, here are some of the frequently asked questions.

1.  My Company Would Like To Operate As A RFMC. What Restrictions Are Related To Target Clients and Assets Under Management?

RFMCs are allowed to have up to 30 qualified investors (of which no more than 15 may be funds or limited partnership fund structures), AND the total value of the assets under management (AUM) can be at most S $ 250 million.

 

2.  Who Are “Qualified Investors”?

Qualified investors have the financial status and knowledge to understand and bear the risks involved in a particular investment. The term “qualified investor” is built upon the “Accredited Investor” notion.

 

3.  Who Are “Accredited Investors”?

An Accredited Investor (Individual) is an individual with (a) net personal assets exceeding S$2 million; (b) Net financial assets exceeding S$1 million, or (c) an income in the preceding 12 months is not less than S$300,000.

An Accredited Investor (Corporation) is a corporation with (a) net assets exceeding S$10 million; or (b) its entire share capital, which is owned by one or more persons, each of whom is an Accredited Investor (individual)..

4.  What Happens If The AUM Exceed The Prescribed Limit Of S$250million?

RFMCs must periodically monitor the size of the managed assets to ensure that it complies with the limit of S$250 million. Any non-compliance can result in either a suspension or revocation of the RFMC status.

 

5.  What Is The Headcount Required For My Company To Operate As A RFMC? Can the Same Person Take on Multiple Appointments Within The Same Company?

The minimum headcount required for the operation of an RFMC is 2. 

An RFMC must appoint a minimum of 2 Directors (at least 1 resident in Singapore). In addition, it must appoint a Chief Executive Officer (CEO) and an Executive Director.  Both the CEO and Executive Director must be residents of Singapore.  In addition, an A/I LFMC must appoint a minimum of 2 Singapore-based representatives with relevant experience in the regulated activity.

There is no restriction for the same person to take on multiple appointments.  As long as the person possesses the required qualification and experience, the CEO can be appointed as Executive Director and the Representative.

 

6.  What Is The Difference Between An Executive Director And Non-Executive Director?

Executive Directors are (employees) involved in the day-to-day running and making administrative decisions on behalf of the RFMC. As they are involved in the day-to-day management of the RFMC, Executive Directors must be residents of Singapore.

Non-Executive Directors are (non-employees) who provide oversight as members of the Board of Directors.  They are not involved in the day-to-day management of the RFMC.

7.  What Relevant Work Experience Do CEOs, Directors And Relevant Professionals Need?

The CEO and Executive Directors should have managerial experience or experience in a supervisory capacity.

Executive Directors and Relevant Professionals should have relevant experience in the financial services industry.

Non-Executive Directors should add value and make a meaningful contribution to the Board of Directors based on their past work experience, qualifications and track record.  

 

8.  How Long Would MAS Take To Process A Registration Application?

The timeline for MAS to review, process and approve any registration application is subject to the business model.  For straightforward cases where the applicant fulfils all the requisite criteria and the documents submitted are in order, it would take not more than 4 months. 

9.  Can My Company Commence Business As A RFMC After Submitting Its Registration To The MAS?

The MAS maintains an online directory of RFMCs on its website.  The RFMC will be listed in the directory if the MAS approves the registration.  Before being listed on the directory, the RFMC should not (a) represent itself as being registered with MAS; (b) enter into any investment management agreement; or (c) receive or invest any customer money.

The directory is available at this link: https://eservices.mas.gov.sg/fid

 

10.  What Are The Common Reasons For MAS Rejecting Applications For Registration Of A RFMC?

The top 3 reasons are:-

  • Lack of experience and track record of key personnel;
  • Adverse records of shareholders, directors and key personnel;
  • Lack of intent to conduct substantive fund management activity.

 

11.  What Happens To RFMC Registration Status If My Company Delays The Commencement Of Fund Management Activity?

The RFMC registration status will lapse if it has not commenced business within 6 months from the date of issuance of the registration.

Do you have questions regarding how to start your RFMC? Speak to us over video consultation via via Lawyer Anywhere.

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How to Develop a Retirement Exit Strategy That’s Right for You

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HOW TO DEVELOP A RETIREMENT EXIT STRATEGY THAT’S RIGHT FOR YOU

Are you ready to retire? Have you planned for your retirement exit strategy?

Many business owners don’t have a plan for what will happen when they retire and leave their businesses. This can lead to difficulties in the transition and cause the business to fail. Retirement planning is an integral part of any successful business. This is why Business Succession Planning is so important.

A successful retirement exit strategy begins with developing a succession plan. Several options are available for retirement exit strategies The best choice for you will depend on your business’s specific situation and personal goals.

The most common types of Business Succession Plans are:-

1.  Selling Your Business To A Co-Owner

Suppose you and your partners own your business together. In that case, you should consider drafting a mutual agreement that sets out the terms and conditions for selling a deceased or disabled owner’s business interest. This can help avoid future disputes and ensure a smooth transition for the business.

One key advantage of this plan is that it allows the co-owner to buy out the shares of the deceased or disabled owner without delay. However, the critical drawback of this plan is that the co-owner requires much cash on hand since he would be prepared to buy out your shares theoretically at any time.

A buy-sell agreement is one way to overcome a co-owned business’s key drawback. A buy-sell agreement is a contract between company co-owners that spells out the terms for when one owner wants to sell their shares, and the other wants to buy them. This can be a beneficial tool for businesses, as it can help avoid conflict and ensure a smooth ownership transition. In addition, most businesses will fund this buy-sell arrangement with life insurance since life insurance is relatively inexpensive and can offset the costs of a buy-sell agreement. 

2.  Passing Your Business To Your Heir

When choosing an heir to take over your business, there are a few things you’ll want to keep in mind.

  • First, is your heir ready and willing to take on the responsibility?
  • Second, is your heir capable of running the business?
  • And third, is your heir the right person for the job, both from a skill and character standpoint?

If you can answer yes to all of these questions, passing your business on to your heir is likely the best course of action for you and your family.

When making business decisions within a family,  keeping emotions in check is essential. Unfortunately, this is easier said than done, especially after an untimely death or disability. Studies show that second-generation businesses rarely survive the transition, as they’re often sold by the inheriting family member or fail outright.

3.  Selling Your Business To A Key Employee

A key employee is a good option for a business succession plan since the employee is generally more reliable than an outside buyer and is more committed to continuing the business’s success.

In a perfect world, the owner of a company would have a clear succession plan that seamlessly transfers ownership to the most qualified and deserving employee. But in the real world, many business owners don’t have plans. Money is often the biggest hurdle when it comes to key employee succession. Most employees aren’t financially able to buy the business they work for.

One solution to this problem is an employee stock ownership plan (ESOP). An ESOP is a retirement plan allowing employees to own a piece of the business they work for. The company makes contributions to the ESOP, which are used to purchase the company’s shares. Employees can then withdraw or cash the shares when they leave the company.

4. Selling Your Business To An Outside Party

You may have to sell your business to an outside party when there isnt’t an obvious successor. Ideally, it would be best to get an updated valuation of your business to ensure that you get the best price.

When it is time to sell your business, you want to ensure everything goes as smoothly as possible. But, unfortunately, you can’t predict precisely what the sales process will have in store. For example, your business may not be as valuable as you have anticipated, there may be a lack of credible buyers, or your business may not be able to sell at all. Therefore, weighing essential to weigh your options and considering the potential drawbacks before selling your business is essential.

No one ever plans to fail, but failure to plan leads to most business failures. No one knows when their time will come, but having a good succession plan in place can ensure a smooth transition of your business when the time does come.

A succession plan can help transfer ownership of the company to another individual, maintain your lifestyle in retirement, provide for your heirs financially, and prepare the business to handle unexpected events.

If you don’t have a succession plan, it’s essential to start developing one now to ensure a smooth transition for you and your business.

You’ve spent your life building your business, but you’re not sure what will happen to it when you retire. Speak to us over video consultation via Lawyer Anywhere for advice on planning your retirement exit strategy.

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How To Review A Contract Like A Lawyer

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HOW TO REVIEW A CONTRACT LIKE A LAWYER

What is the first thing you do when someone hands you a contract?

Anxious business owners who want to get the deal done may scan the contract before signing it. Likewise, the more cautious business owners might want to read the contract before committing. But the thought of plugging through the agreement may be too daunting, so they shove it to the bottom of their work pile to read later.

Before committing, more cautious business owners may read the contract. However, ploughing through the agreement may be too daunting, so they push it to the bottom of their work pile to read later. Does this sound familiar to you? You may have done one of these things as a business owner at some point.

Regarding contracts, it is always better to be safe than sorry. Therefore, reading through a contract before signing is essential to understand what you agree to.

By signing a contract without reading it, you have essentially agreed to all the terms and conditions listed in the contract without understanding. This can be a risky move, as you may not be aware of all of the potential consequences of signing the contract. In addition, if you encounter any problems or issues after signing a contract, it cannot be easy to get out of the agreement. So, before you sign anything, please read through it carefully.

Have you ever wondered how lawyers can review the lengthiest contracts at lightning speed?

Well, it’s no secretthat we routinely use checklists when reviewing contracts. In our experience, checklists are essential when reviewing contracts for the first time, as it can be easy to overlook critical items. Using a list, we can ensure that every detail is noticed.

You, too, can review your contract in 10 minutes.

5 Tips to Review Your Contract

  1. Note the specific requirements in the contract.
  2. Compare the requirements in the contract to the project specifications.
  3. Ensure that all the required information is included in the contract, such as contact information, payment terms, and delivery dates.
  4. Review the contract’s terms and conditions, and ensure they are acceptable.
  5. Ask any questions about the contract, and ensure your queries are answered.

What To Look for During a Contract Review

Contracts can be tricky, and crocodiles are always lurking in the dark. You need to know where to look for these crocodiles. Here are some places where you can find crocodiles during a contract review.

1.  Key Clauses & Terms

Confidentiality clauses protect sensitive company information, indemnification clauses protect the company from being held liable for any damages or legal costs, and termination clauses outline the conditions under which the contract can be ended. Finally, dispute resolution clauses specify how any disputes will be resolved. Such clauses are all critical sections in an agreement . Therefore, they should be given extra attention to ensure the wordings are acceptable.

2.  Termination & Renewal Terms

Key clauses to look for include automatic renewal language and opt-out windows. Automatic renewals clauses usually mean that the contract will generally renew automatically at the end of the current term. While the clause usually allows for cancellation within a set notice period, many business owners forget to cancel before the deadline. They are then stuck in a contract they no longer want or need.

3.  Clear, Unambiguous Language

One issue that often arises when reviewing a contract is ambiguous language. This is when the wording of a sentence needs to be clarified. This can lead to different interpretations by the parties involved. Vague or unclear terms can lead to conflict. It is, best to revise the wording to be more precise.

4.  Default Terms

Default clauses set out the terms which would apply where one party fails to meet their obligations. Again, knowing the potential consequences can help prevent unpleasant surprises down the road.

When reviewing a contract, it is essential to remember to focus on your top 5 concerns and to be on the lookout for any potential crocodiles hidden in the agreement. By using this simple 10-minute review system, you can ensure that your contract will enforce your business deal and protect your interests.

Need help reviewing your contract? We offer video consultation via Lawyer Anywhere so that you can get the help you need. Contact us today to get started.

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Are You Disguising Your Employees As Independent Contractors?

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ARE YOU DISGUISING YOUR EMPLOYEES AS INDEPENDENT CONTRACTORS?

Many of Singapore’s Small & Medium Enterprises have, as a cost-cutting measure, turned to the services of freelance contractors to meet their workforce needs instead of hiring employees.

While the use of freelance contractors does provide cost savings, business owners must have a clear understanding of who qualifies as freelance contractors.

In recent years, the Singapore Courts have come down hard on companies who hire “temps” or freelance contractors to avoid paying for employee benefits.

The Courts may disagree that your hired hand is not an “employee” but a “freelance contractor” based on your declaration.

Why Does the Difference Matter?

When you misclassify workers as “freelance contractors” who are your employees, you expose your business to several significant legal liabilities. These can include fines and penalties for violating labour laws, such as the Workmen’s Compensation Act, the Employment Act, and the Central Provident Fund Act. In addition, not complying with your statutory obligations to your employees can cause significant damage to your business.

 

Factors In Determining Employer- Employee Relationship

The Court looks at various factors to determine if an employer-employee relationship exists. These include the actual mechanices of the relationship, as well as economic considerations. For example, the Court will look at how the workers are paid, whether they provide benefits, and how much control the employer has over their work. Additionally, the Court will examine the parties’ intent and the work’s nature.

Ultimately, the Court will consider all the facts and circumstances to decide.

1. Degree of Control

One important consideration is the degree of control over the worker’s activities.

In a classic employer-employee relationship, the employee is generally obligated to follow the employer’s instructions in all tasks that lead up to the final work output. Whereas in the case of a freelance contractor, the hirer’s control is often limited to the scope of the project and its deliverables while having little say over how the worker should perform each of the tasks that make up the project. The freelance contractor’s obligations to the hirer are to complete the project/task. In contrast, the execution of tasks involved in the deliverables is left to the freelance contractor.

The higher the control over the worker’s activities, the more likely the “employer-employee” relationship exists. This is because the employer is in a better position to dictate the terms and conditions of the work, and the worker is in a less advantageous position to negotiate. As a result, the worker is more likely to be considered an employee, and the employer is more likely to be considered the employer.

2. Factors of Production

Another critical consideration in determining whether an employer-employee relationship exists is the ownership of factors of production. For example, who provides the tools and equipment necessary for the job, as well as the place of work? If the hirer provides these, it is more likely that an employer-employee relationship exists. Again, this is because the hirer has more control over the worker in this situation.

3. Financial Control

The third important consideration when determining the nature of the working relationship is the degree of financial control for services rendered.

For example, is the payment for services made upon completion of the project/task or on a regular periodic basis?

Suppose payment is made upon completion of the project/task. In that case, it is more likely to be viewed as a freelance contractor relationship. On the other hand, if payment is made regularly, it is more likely to be considered an employer-employee relationship.

4. Other Factors

The Courts have considered several other factors when determining whether or not an employer-employee relationship exists.

For example, the Courts will look at the terms of the agreement between the parties, such as how long the agreement is for, the nature of the job or services to be performed, etc.

What Can I Do To Minimise My Liability?

While some business owners have avoided legal liability through mis-characterisation, others have paid a high price for disgusing their employees as freelance contractors.

The rule of thumb is “If you treat the worker as an employee, so will the authorities.”

Is your temp a freelance contractor or an employee? We offer video consultation via Lawyer Anywhere so that you can get the help you need. Contact us today to get started!

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Understanding Buy-Sell Agreements: What to Look For

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UNDERSTANDING BUY-SELL AGREEMENTS : WHAT TO LOOK FOR

Singapore’s Small & Medium Enterprises (SMEs) account for more than 97% of businesses in Singapore. 

However, many SMEs business owners don’t have a plan for what will happen when they retire and leave their business. The transition can be difficult without a plan, and the business may fail.

A Buy-Sell Agreement provides a structure to ensure a smooth transition and protect the interests of the owners and the business.

1.  What Is A Buy-Seller Agreement?

A Buy-Sell Agreement is a legally binding contract between business owners that sets out the terms and conditions that will apply in the event of specific events, such as death, disability, retirement or withdrawal from the business.

The primary purpose of a Buy-Sell Agreement is to ensure that the business continues and that the beneficiaries receive a fair market price for their interest in the business. Therefore, this document is vital for business owners because it can help avoid disputes among the owners about the future of the business, and it can help ensure that the business is sold fairly and orderly.

While a Buy-Sell Agreement provides a structure to ensure the smooth continuity of a business, a crucial issue remains – how the business owners will source the funds necessary to buy out the interest of the deceased or disabled owner?

Several options to fund a Buy-Sell Agreement, include cash payments from personal savings, third-party borrowing, sale by instalments, disability insurance, or life insurance.

One of the most common and effective methods of funding a buyout of a disabled or retiring partner is using life insurance policies. This method provides several advantages over other methods of funding.

A lump-sum payment to the deceased shareholder’s estate is generally the best way to proceed when a shareholder dies. This is because life insurance proceeds are available to fund the payment and are generally free from taxes. Additionally, the cash values in the policy can be utilised for the buyout of a retiring or disabled partner while allowing the withdrawing partner to keep the policy.

Although insurability may be a problem due to differences in age or state of health of the shareholders, differences in the premiums can be addressed by appropriate compensation measures.

 

2.  How Does A Buy-Seller Agreement Work?

 

Case Scenario – TanWong Pte Ltd

Mr Tan and Mr Wong jointly own and operate a car repair workshop. The workshop has been successfully running for over 35 years, with the two businessmen sharing ownership equally. They have been friends and business partners for a long time and operate the business informally. They made all business decisions jointly or strived to reach at a mutually acceptable compromise even when they didn’t initially agree. This approach has worked well for them, as they could maintain the trust and cooperation essential for a successful business partnership.

Mr Tan dies suddenly of a heart attack, leaving no will. By the succession laws, his wife owns half of his assets, and his two sons share the other half. Mr Tan’s assets comprise his shares in TanWong Pte Ltd. Mr Wong now finds himself in a difficult position because he has to work with Mrs Tan and her two sons. They all have equal voting rights on the company’s board. Through the unexpected demise of his business partner, Mr Wong now finds himself in a regrettable position of having business owners imposed upon him with no genuine interest or knowledge of the business.

 

Case Scenario – TanWong Pte Ltd: Buy-Sell Agreement at Work

The situation illustrated above could have been avoided by executing a Buy-Sell Agreement between the business owners while Mr Tan was still alive.

Suppose Mr Tan and Mr Wong had met up with their lawyer and agreed on the terms of a Buy-Sell Agreement while Mr Tan was still alive. In that case, they could have mutually agreed to allow either party to buy the other’s shares at a specified price on the demise of either party.

Additionally, they could also have bought insurance policies on each other’s lives, with the result that upon the death of either business owner, the beneficiary of the policy (the surviving business owner) can use the insurance proceeds to buy the deceased’s share of the business from his next of kin.

In this case scenario, on Mr Tan’s death, Mr Wong would become the business’s sole owner, TanWong Pte Ltd. At the same time, Mr Tan’s heirs would receive a fair value for his shares in the business.

3.  Who Should Execute A Buy-Sell Agreement?

A common misconception is that any business owner, including a sole proprietor, can execute a Buy-Sell Agreement. However, as the parties to a Buy-Sell Agreement include all the business owners, it would be impossible for a sole proprietor to execute such an agreement.

While sole proprietors can also undertake business succession planning, the mechanisms for succession planning for sole proprietors relates to Keyman Insurance”. 

The types of business organisations that benefit the most from executing a Buy-Sell Agreement are partnerships and corporations. These organisations typically have the most at stake regarding the business’s ownership and management. By having a Buy-Sell Agreement in place, these organisations can ensure that the business can continue operating in the event of the death or disability of one of the owners or managers. This can be critical for preserving the value of the business and ensuring that it can continue to generate profits for the owners.

4.  When Should A Buy-Sell Agreement Be Executed?

Many owners of successful businesses put off executing a Buy-Sell Agreement until it’s too late. Business owners need to create a Buy-Sell Agreement as soon as possible. This will help ensure that the business can continue to operate smoothly in the event of the death or disability of one of the owners. By creating the Agreement now, you can avoid costly and time-consuming disputes later.

No one ever expects to die or become disabled, but the truth is that it can happen to anyone at any time. If something happens to one of the owners of your business, the rest of the team will need to know what to do. Who will take over the business? How will the finances be handled?

We can help you create a Buy-Sell Agreement tailored to your business needs. We will work with you to ensure that all of your bases are covered and that the Agreement is clear and easy to understand. By creating the Agreement now, you can avoid costly and time-consuming disputes later. Speak to us over video consultation via Lawyer Anywhere today to get started!

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Are FMC, SFO, and MFO All the Same? Why Are They So Popular?

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FMC, SFO, MFO : ARE THEY ALL THE SAME? WHY ARE THEY SO POPULAR?

Despite the rapid development of the Chinese family office scene, the family office concept remains confusing to many Chinese. In China, the lines between family business offices and trusts are only beginning to be developed. Due to China’s strict regulations, the “family offices” of China’s ultra-wealthy investors take the form of investment firms to manage their wealth.

Some of the more notable examples include Yunfeng Capital (located in Shanghai) which manages the fortunes of Jack Ma and David Yu, Wu Capital (located in Beijing) which controls the wealth of real estate tycoon Wu Yajun and Blue Pool Capital Ltd. (located in Hong Kong) which manages the fortunes of Jack Ma and Joe Tsai. These investors are establishing their own investment firms to have more control over their investments and a more significant say in managing their money.

To many Chinese, the terms “fund management”, “single-family office”, and “multi-family office” all mean the same thing – raising and management of funds for investments.

Suppose your Chinese clients have approached you to start a family office for raising and managing investment funds. In that case, this article will help you better understand these 3 different types of fund management companies in Singapore.

In reality, there is a big difference between these 3 terms.

  • The fund management company (FMC) is the most general term. It refers to any company that manages money for other people or organisations.
  • A single-family office (SFO) is an FMC expressly set up to serve a single-family.
  • A multi-family office (MFO) is a company that provides services to multiple families.

1.  What Is A FMC?

Any company that manages money for other people or organisations is called a fund management company. The role of FMCs, in general, is to manage a large pool of funds for investment. Individuals or corporations can contribute to the pooled funds by “buying into” an investment product. The FMC would typically charge a fee for such investment advice.

2.  What Is A SFO?

The concept of a family office has been around for a long time in the West. The nature and function of the family office are generally established by its founder with a specific purpose in mind. They may change over time as the family grows, or their needs change across generations.

An SFO is a collection of staff who provides dedicated personal and professional services to a family. A family office’s services are highly personalised and tailored to one family’s specific needs and preferences. Wealth management, tax planning and compliance, investment management, and estate planning are some of the most common services provided by each family of offices.

3.  What Is A MFO?

An MFO is a wealth management company that offers ultra-high-net-worth (UHNW) clients customised services. An MFO typically employs a small team of experts in various fields, such as investment management, financial planning, tax planning, and estate planning. MFOs provide a comprehensive wealth management approach that assists clients in preserving and growing their wealth over time.

The MFO as a business model arose due to rapid technological advancements in the financial markets, which necessitated greater sophistication and skill in financial advisers. By providing a wide range of services and typically overseeing their clients’ entire financial portfolio, the MFO helps defray the high cost of maintaining an SFO. Furthermore, MFO professionals can provide specialised knowledge on income taxation, estate planning, and investments.

There are many different fund management companies, each with its advantages and disadvantages.

For example, a SFO is an excellent choice for families with a large amount of investable assets because they can provide various services tailored specifically to the family’s needs.

On the other hand, a MFO is ideal for families with fewer assets because it provides a broader range of services at a lower cost than a SFO.

Ultimately, the family’s specific needs and investable assets determine the best type of fund management company.

When managing your finances, it’s crucial to get the right advice. If you’re unsure whether you need to appoint a fund management company, MFO or even set up your own SFO, speak to us over video consultation via Lawyer Anywhere. We can discuss your needs and recommend the best solution for you.

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Refinancing : A Full Breakdown of How You Can Really Save Money

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REFINANCING : A FULL BREAKDOWN OF HOW YOU CAN REALLY SAVE MONEY

Suppose you are interested in saving money on your mortgage.

In that case, this article aims to help you better understand how refinancing or repricing your mortgage can help you do that.

What exactly is the “refinancing/repricing” business all about?

Refinancing means replacing your current housing loan with another – one with a much lower interest rate.

Most of us in Singapore are proud owners of our homes, and we would have taken up a housing loan when we purchased our homes.

Questions:

  • “When was the last time you took a good look at your housing loan statement?”
  • “Are you still enjoying the promotional rates offered by the bank?”

Being all excited to be proud owners, we are occupied with ideas of how to renovate & decorate our new home. The 10-page letter of offer filled with legal jargon provided to us by the bank officer would be signed and sealed with little thinking. We are the least bit affected by the bank officer’s notification that the loan period is for 25 years.

Little do we realise that for most of us, our current housing loan is secured by a mortgage based on the promotional rates offered by the bank at the time of the loan. These promotional rates would only be low for the first couple of years (maximum 3 years); the rates would have gotten progressively higher.

Refinancing is one of the best ways to save money on your mortgage to refinance your mortgage at a lower interest rate. In addition, you can reduce your monthly mortgage payments by refinancing your mortgage. Another benefit of refinancing your mortgage is getting a longer loan term. This may allow you to keep your monthly payments low.

If you are interested in refinancing your mortgage, it is essential to compare the interest rates of several lenders to find the best interest rate.

Can we save money by refinancing? What are the actual savings?

Generally, we can save money by refinancing!

Illustration of what the actual savings are.

CURRENT SITUATION – Loan Amount $800,000/- @ 5.5% p.a.

Year

Current Rates

Current Instalment

Total Payment Per Year

1

5.50%

$4,642.31 

$55,707.72

2

5.50%

$4,642.31

$55,707.72

3

5.50%

$4,642.31

$55,707.72

4

5.50%

$4,642.31

$55,707.72

5

5.50%

$4,642.31

$55,707.72

NEW PROMOTIONAL RATES OFFERED BY BANKS

Loan Amount $800,000/- @ 1.25% (1st year); @ 1.35% (2nd year) & @ 1.45% (3rd year)

Year

Current Rates

Current Instalment

Total Payment 

Per Year

 

REAL SAVINGS!!

1

1.25%

$2,766.01 

$33,192.12

 

$22,515.60

2

1.35%

$2,803.75 

$33,645.00

 

$22,062.72

3

1.45%

$2,841.81 

$34,101.72

 

$21,606.00

4

5.50%

$4,642.31

$55,707.72

 

$ –

5

5.50%

$4,642.31

$55,707.72

 

$ –

      
  

TOTAL ACTUAL SAVINGS FOR 3 YEARS

 

$66,184.32



But before you take the plunge, you should factor in the cost of refinancing. You need to check if you are still within the “lock-in” period, i.e. would any penalty be imposed (usually 0.5% to 1% of the outstanding loan amount) if you terminate the existing housing loan early.

Final Tip: You should check with your current bank to review your loan rates. Most banks would allow customers to convert to the “new package”. That way, you will enjoy the promotional interest rates without hassle and trouble.

It is possible to save money and improve your quality of life by refinancing your mortgage. Consult us via Lawyer Anywhere to refinance your mortgage.

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Do You Know How Much Your Business Is Worth?

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DO YOU KNOW HOW MUCH YOUR BUSINESS IS WORTH?

As a business owner, you should know your company’s value. This will help you make informed decisions about your business, whether you’re looking to sell, seeking investment, or planning for succession. Of course, your circumstances will determine the best way to assess your company’s worth.

We’ll explore different methods of valuing a company and how to choose the best one.

 

What is Business Valuation?

Business valuation is figuring out how much a business or company is worth in terms of money. Most businesses are valued based on their financial health, market share and future development prospects.

 

Purpose of Business Valuation

A business valuation can be used for various purposes, including the sale of the business, the merger or acquisition of another business, taxation, and estate planning. However, the most common reason for business valuation is to support the sale or transfer of business ownership.

Business Valuation Approaches

The next thing you need to consider is the value itself.

There are 3 basic approaches to determining value:

(1) the market approach,

(2) the income approach, and

(3) the asset approach.

Choose the method that works best for your business and situation.

Once you have selected your method, it is time to gather data. This data can include financial statements, market research, and appraisals of tangible assets. Collecting positive and negative data is necessary, as this will help you create a realistic model. After gathering the data, establish and measure the business’s qualities or weightings to establish a model that reflects the business’s value.

1.  The Market Approach

The market approach looks at your business and compares it to recent sales of similar businesses. This is a good way to get a general idea of what your business is worth.

To get started, gather information on similar businesses that have been sold recently. This can be done by searching online, talking to industry experts, or hiring a business appraiser. Once you have this information, you can understand what your business is worth.

The market approach is a great way to get a general idea of your business’s value. Still, it’s important to remember that every business is unique. Your business may have aspects that make it more or less valuable than the businesses described in the information you gathered.

2.  The Income Approach

Like the market approach, the income approach looks at your business based on cash flows. But this method compares your business’s net income to the net income of similar businesses that have been sold.

This approach is useful because it excludes the price paid and focuses purely on the business’s ability to generate cash. To use the income approach, you must gather your business’s gross and net income over a three-to-five-year period. You must divide this number by the price received in similar sales to determine a percentage. This percentage can then be used to determine the value of your business.

3.  The Asset Approach

The asset approach focuses on the value of the business’s physical and intangible assets. This approach compares the value of the assets to the value of similar businesses that have been sold.

It’s important to remember that the asset approach to valuing a business can be used differently. For example, some firms include operating and non-operating (or inventory) assets, while others only include operating assets.

To establish your business’s fair market worth, add all its assets and deduct any liabilities. This gives your company’s net asset worth a decent starting point for evaluating fair market value.

Using the asset approach to value your business requires a few considerations. First, to only include assets owned by the business. Second, some assets may be evaluated at their current market value, while others are determined using historical costs (initial depreciation). A good accountant can advise you on the best method to use.

The most important thing to remember when valuing your business is that there is no one-size-fits-all answer. Every business is unique, and there are a variety of factors that can affect its value. However, by understanding the different valuation methods and using them to assist in your decision-making, you can arrive at a fair and accurate estimate of your business’s worth.

Every business is different, and as such, the difficulties that you face will vary. We offer video consultation via Lawyer Anywhere and can help you navigate the ups and downs of running your own company.

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Susan Tan

Senior Legal Executive

Qualifications:

  • BSc (Econs) in Management Studies (Hons), University of London, England
  • Diploma in Legal Executive Studies, Temasek Polytechnic, Singapore

With more than 10 years of experience in the financial industry, Susan Tan, who joined us from one of the leading corporate and investment banks in Singapore, provides invaluable expertise and knowledge in corporate secretarial.

She is conversant and familiar with the local regulations and requirements for business entities in Singapore.

As a member of our team, Susan is responsible for maintaining and updating the Company’s statutory registers and records, filing all necessary documents and forms with the Accounting & Corporate Regulatory Authority (ACRA), Ad-hoc assignments such as allotment and transfer of shares, amendment of Company’s Constitution and submission of Annual Return to ACRA.

Apart from corporate secretarial work, Susan has considerable experience and expertise in compliance advisory matters, making her a valuable member of our firm.