Singapore is known as one of the financial centers in the world, with a stable and safe economy it’s a perfect place for asset management. And for anyone thinking of protecting their assets in the country, they have five asset holding structures to choose from: Individual, Sole-proprietorship/ Partnership – Limited Partnership or Limited Liability Partnership, Local Company, Trust, and Offshore Company. There are advantages and disadvantages to each one so in making a decision it’s important to weigh the pros and cons first before finalizing any plan.
Asset Holding Structures Advantages and Disadvantages
An Individual Asset Holding Structure
The advantage of going solo in an asset holding structure is that it’s easy to use and has a simple framework. For people who don’t like the hassle of having to file too many paperwork, an individual holding structure is very attractive. Since it’s easy to start and has a simple framework, almost anyone who comes to, or lives in the country can easily start one themselves.
Because of its simple nature, it’s a lot riskier than most asset structures. It poses a lot of disadvantages for people opting for an individual style holding. It offers no protection for its owners against creditor claims, estate duty (in countries where it is still implemented) and other tax laws. Succession problems are also prone to happen especially for individuals who die intestate, and disputes can easily eat up the assets that an individual intended to safe keep. Other issues that an individual structure carries are problems formed from tenancy-in-common and joint tenant ownership.
A Sole-Proprietorship/Partnership (LLP & LP)
LLP and LP’s are relatively new to the Singaporean asset management platform, but they are flexible and offer alternatives to individual asset holding. One of its advantages is the ease of setup similar to an individual structure. Opening an account is also fast and convenient.
One of the disadvantages, especially for LP, is the fact that it is not considered as a separate legal entity. This means that it still has the liabilities that an individual asset holding has. An LLP type of holding structure can offer some protection though since it is considered as a separate legal entity like a company. And this trait of an LLP allows any partners from being targeted by creditors and unwanted claims.
A Local Company Asset Holding
A local company proves as one of the more stable modes of asset holding; it’s perfect for asset management because unlike the other three, a company is considered as a legal entity. A legal entity protects an individual’s personal assets from creditors, mortgages and faux lawsuits that only aims to drain their resources. Legal entities are considered as artificial persons who can defend itself in court and also sue anyone who commits a crime against it. Companies are not bothered by issues concerning succession, and since it is a legal entity, it can continue perpetually even after the original shareholders are gone. Directors are in charge of management which lessens the burden of direct management from shareholders. Capital for a company can also be raised by opening it to the public via public stock shares.
The three disadvantage that people can get from choosing a local company is the number of paperwork that needs to be submitted to their respective government agencies, the regulatory staff requirements for incorporation such as audits and secretarial costs, and the lack of flexibility on how assets and company income are used.
Trust or Legal Trust
Another stable way of holding an asset is through the use of Legal Trust. A legal trust holds a lot of advantages for individuals who want to safeguard their assets for beneficiaries. It offers both privacy and confidentiality to people who chose it. The information concerning overall assets and revenue are well hidden by Trust company which protects people from creditors and other persons trying to gather intel. It is ideal for heirs and successions, and in some areas tax exemptions are also possible. It is exempt from tax creditor claims, mortgages and lawsuits similar to a local company. Managing and distributing assets are also more flexible which gives it leverage above a local company
The drawbacks of using a Legal Trust involves the fees for the setup and the services of a professional trustee if a person decides to hire one.
An offshore company is the same as a local company but with the added features of confidentiality and privacy. It also offers tax exemptions if the individual chooses a country that as tax exemptions. An offshore company has more freedom regarding transferring and has fewer succession rights. It also offers a more convenient administration. Overall its a stable way of asset management especially if anonymity is one of the features that a person takes into account.
The disadvantage that most people face is lesser prestige, add to that the fact of higher costs of running a foreign company.
Choosing the correct asset management vehicle can be daunting for some but being cautious and weighing the risks before investing anything is the key to making things work.
Do these asset holding structures seem confusing? Give us a call and we’ll be glad to discuss all aspects of each type with you.