Starting and running a small business in Singapore can be exciting, but legal missteps can turn this excitement into stress quickly and unknowingly. From confusing contracts to missed compliance, these common mistakes can affect Singapore small business owners and lead to costly disputes or penalties.
The good news? Most of these mistakes can be avoided.
Here are six common mistakes that SG Law Guru gathered, and how you can avoid them:
1. Neglecting Written and Properly Reviewed Contracts
Many business relationships begin with a handshake or a WhatsApp agreement. While verbal promises may feel convenient, they’re rarely enforceable. Even written contracts can cause problems if they’re vague, copied from templates, or never reviewed by a lawyer.
Common issues:
- relying on verbal or informal agreements
- using online templates that don’t reflect your actual terms
- signing documents without legal review
💡 SG Law Guru suggestion:
- always put important agreements in writing
- avoid “copy-and-paste” templates if you don’t fully understand their terms
- before signing any contract, engage a lawyer to review it.
Clear, well drafted agreements protect both parties and prevent any disputes later.
2. Choosing the Wrong Business Structure or Skipping Licensing
Some entrepreneurs start as sole proprietors to “keep things simple”, only to face tax or liability issues later. Depending on your industry, you may also need additional licences after registering your business with the Accounting and Corporate Regulatory Authority (“ACRA”).
Common issues:
- registering under the wrong entity type (e.g., sole proprietorship, partnership, private limited etc.), business activities
- skipping regulatory licences or permits
- failing to update ACRA when ownership or business details changes
💡 SG Law Guru suggestion:
If you are unsure, seek advice from a corporate secretary or company registration consultant. The right setup can save you future costs, and protect your personal assets.
3. Mismanaging Employee Relationship and MOM Compliance
Hiring staff is a major milestone, and that comes with legal responsibilities. The Ministry of Manpower (“MOM”) sets clear rules for employment contracts, working hours, and benefits. Misclassifying workers or skipping formal agreement can lead to penalties or disputes.
Common issues:
- using freelancers when the role is actually full-time employment
- no written employment contract or ambiguous job terms
- overlooking MOM guidelines on leaves, overtime, or CPF
💡 SG Law Guru suggestion:
Before hiring, prepare a proper employment contract that complies with the Employment Act. When in doubt, consult a legal advisor.
4. Overlooking Intellectual Property (“IP”) Ownership and Protection
Your brand, logo, website, and product designs are valuable assets. Yet many SMEs forget to protect them. Without IP registration, anyone can copy your work or even register your name first.
Common issues:
- not registering a business name or trademark with IPOS
- assuming ownership of designs or software created by freelancers
- failing to include IP ownership clauses in contracts
💡 SG Law Guru suggestion:
- register your trademarks early to safeguard your brand value.
- specify IP ownership clearly in your contracts.
Early actions prevent disputes and safeguard your brand value.
5. Failing to Safeguard Customers Data (PDPA Non-Compliance)
Data breaches are becoming increasingly common, and businesses must comply with the Personal Data Protection Act (“PDPA”). Collecting or retaining customer data without proper consent or security measures can result in hefty fines.
Common issues:
- missing written privacy statement
- collecting customer data without consent
- poor security practices
- sharing data without permission
💡 SG Law Guru suggestion:
Craft a clear privacy policy to protect your business and customers. Always obtain consent before collecting personal data, consider sending staff for PDPA compliance training.
6. Not Managing Business Risks with Proper Insurance
Many SMEs assume insurance is optional until something goes wrong. Whether it’s a lawsuit, a workplace injury, or property damage, the right insurance can prevent financial loss.
Common issues:
- no public liability or professional indemnity insurance
- lack of coverage for workplace injuries or business interruption
- not reviewing policies as the business grows
💡 SG Law Guru suggestion:
A little protection goes a long way. Speak to your insurance advisor about coverage suited for your business and risk exposure.
Final Thoughts
Legal mistakes often happen not because business owners don’t care, but because they’re busy building their dreams. Understanding these pitfalls helps Singapore small business owners protect what they’ve built, and they can focus on growth with peace of mind.
At SG Law Guru, we simplify complex legal matters so you can run your business confidently and stay compliant.
Disclaimer: This article is for learning and discussion purposes only and is not legal advice. Each accident and claim is unique. Consult a qualified lawyer for advice specific to your situation.
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