How to start up a business in Singapore?
Table of Contents
You will spend no more than a few days on the entire procedure for registering a business. And in some cases, even a couple of hours. The requirements for starting a business in Singapore are much more loyal than in many other countries. The minimum authorized capital is only 1 Singapore dollar (about 0.7 US dollars), and the minimum number of founders is one person. Both a Singaporean and a foreigner can own a company, but a country resident must be hired as a director (manager). However, if an entrepreneur has a work visa, then this requirement can be legally circumvented. Another significant plus is that a foreign citizen can own 100% of the company’s capital.
Of all the organizational and legal forms of enterprises available in Singapore, only two are the most popular: Private Limited Company (a private limited company) and Exempt Private Limited Company (an exempt private limited company).
- Private Limited Company. This type of company is the most common among private businesses in Singapore. By registering a Private Limited Company, you form an independent legal entity, and all founders are liable for debts only within the personally contributed amount. Many business owners in Singapore refer to the Private Limited Company as the most profitable form of business in taxation.
- Exempt Private Limited Company. This form is often chosen by aspiring entrepreneurs who do not yet have experience in big business. Exempt Private Limited Company can be established by no more than 20 shareholders who are not legal entities. Various tax incentives are provided for this type of business, and it is allowed not to file annual financial statements if the firm’s cash turnover exceeds $5 million.
How to start up a business in Singapore?
To register a business in Singapore, you must go through the following stages:
- obtaining permission to use the selected name for the company. Your company name must be unique. If the name contains words such as travel agency, university, finance, bank, and several others, then you will need to obtain additional permissions to use these words.
- collection and preparation of constituent documents. The package of necessary documents consists of the memorandum of association, the company’s charter, a document on compliance with legal requirements, a document with information about shareholders/founders/directors/secretaries, copies of the passports of the founders of the company. Suppose there is a legal entity among the shareholders. In that case, a certificate of its registration, information about the founders, and copies of their identity documents must be added to the package of documents.
- a signature of constituent documents. You can sign documents both in Singapore and abroad. However, signing documents in Singapore will significantly save time since you will not have to wait for their transportation from another country.
- submission of documents to the Registrar of Companies (full name of Accounting and Corporate Regulating Authority), payment of a state fee in the amount of $330, and awaiting final registration. When submitting documents, do not forget to indicate on a special form the types of activities your company will be engaged in. As a rule, two main types of activities are indicated.
Oddly enough, the biggest problem that can arise when starting up a business in Singapore is the approval of the company’s name. Suppose the name you choose is similar in sound or spelling to an existing company in Singapore or world-famous brands. In that case, the approval procedure may be delayed indefinitely. Since there are many registered companies, everyone can face the problem of choosing a unique name. If the name is immediately chosen successfully, then the procedure for its approval will not take more than one day.
Opening a bank account
After registering a company, you need to open a bank account in one of the banks. It can be either a purely Singaporean bank or a branch of any foreign bank located in Singapore.
- When registering an account, at least one company representative must be present to answer questions that arise during its registration.
- Any amount over one Singapore dollar can be deposited into a bank account. To open an account, you will need to inform the bank’s employees about the amount of money you plan to maintain in your company. If the amount you declared during registration differs from the actual turnover of funds, then the bank will most likely start asking you for a monthly payment for banking services. In all banks, it can be slightly different but usually does not exceed $50.
Required documentation package:
- passport (domestic and international);
- registration certificate;
- memorandum of association;
- register of company management, shareholders;
- description of the type of work of the company;
- international passport;
- information about the beneficiaries;
- papers confirming business experience (bank statements, contracts with consumers, suppliers), dated no later than 6 months.
It is often difficult for a foreign citizen to understand the intricacies of the legislation of a foreign country, even as transparent as in Singapore. Therefore, for the successful registration of your business, we advise you to contact one of the Singapore consulting companies. There you will be provided with consulting services, help with collecting a package of documents and its direct registration, provide a legal address, help with hiring management personnel.
Taxation. After you figured out how to start up a business in Singapore, you need to sort out the benefits issues.
- Singapore is a country that has created optimal conditions for starting its business. Many entrepreneurs who decide to start a business in Singapore will not face the problem of double taxation. An agreement may be signed between Singapore and your country prohibiting taxing businesses in two countries simultaneously.
- For the first three years of its operation, any company will not pay taxes on one hundred thousand Singapore dollars of income. And for the next two hundred thousand dollars of income, also for three years, 50% benefits will be provided.
- Value Added Tax is only 3%.
What kind of business to do?
In Singapore, good profits can be made on tourists and visitors. This country is one of the most extraordinary and beautiful countries in Asia, and every year it is visited by more than 12 million tourists. The figure is impressive; draw your conclusions. There are many business ideas for tourism, and if you come up with something original, you will be successful.
If tourism is not attractive, do trade. The location in the heart of Southeast Asia made it possible to successfully establish the import and export of goods to the United States of America and other countries. If you cannot immediately engage in international trade, start on a smaller scale, gradually expanding.
Today, many entrepreneurs are thinking about opening an IT business since it is promising and profitable. Oftentimes, a country like Singapore is chosen for doing IT business. Firstly, this jurisdiction is renowned for its excellent reputation, which opens up great opportunities for foreign entrepreneurs. Secondly, the jurisdiction has quite loyal tax legislation.
The procedure for starting an IT business cannot be called elementary since it has many nuances and pitfalls that can be encountered in the process. However, due to a large amount of information on the Internet about how to start up a business in Singapore, many entrepreneurs decide to do it on their own, which makes a huge mistake. You need to understand that you will have to face numerous difficulties in the process, which only professionals can effectively cope with.
Preliminary assessment for starting an IT business in Singapore
Before deciding to start up a business in Singapore, you should weigh the pros and cons. There is an opinion that doing business in this jurisdiction requires a large initial financial investment. On the one hand, this is true because to run a full-fledged business; you need to keep accounting, make tax deductions promptly, acquire reliable suppliers, and open an account in a reputable bank.
On the other hand, starting up a business in Singapore with minimal investment is also possible. There are several options for implementing projects with low costs. Still, here it should be borne in mind that only a real presence in a jurisdiction can guarantee one hundred percent reliability and safety. Therefore, before using schemes with minimal investment, you must carefully weigh all the risks.
It is often said that registering a company in this jurisdiction guarantees quick returns and huge profits from the first days of work. However, this is not quite true. The fact is that the IT market of Singapore is not very large but very competitive; because of this, one cannot count on a quick guaranteed profit. This jurisdiction is primarily valuable to others for its reputation. Opening a high-tech company in Singapore means access to major international investors and the opportunity to collaborate with the world’s best companies.
Stages of starting a IT business in Singapore
Starting up a business in Singapore itself is carried out in several main stages, and each of them must be approached carefully. Once again, it should be said that it is better to entrust this work to experienced and highly qualified specialists since they will cope with it faster, better, and even help save some money.
- Choosing a mediator. How to start up a business in Singapore? Even if the company has a competent and strong department and specialists who are versed in the conduct of international business, outside help may still be needed. First of all, difficulties will arise with the approval of the company name and registration with ACRA. Let’s talk about companies with no legal department and experts specializing in starting a business in another jurisdiction. You will need comprehensive assistance from the outside.
By contacting specialists, you get:
- Registration including all fees and duties
- Legal address
- Secretary and director services for a limited period
- Security deposit
- Delivery by courier of the required package of documents.
- Name reservation. How to start up a business in Singapore? First of all, the company’s name must be original; in case of similarity of the name with well-known brands, registration may be refused. The company will receive claims from the copyright holders of the trademark with which the similarity is observed. In addition, the name of the company should be concise, capacious, and memorable.
To check the originality of the name, you can use online services, but you should not trust them 100 percent. And so that there are no problems when registering a company name, it is better to immediately prepare several fallback variants of names that will be used if the main name is rejected.
- Management structure. The choice of the organizational and legal form is one of the most critical stages. Many entrepreneurs do not look to the future, so they decide on a management structure based on the current situation, which is why they suffer greatly in the future. Simply put, one should choose from two forms of management: Company Limited or Limited Liability Partnership. There are many significant differences between them, which, first of all, relate to taxation issues. It is extremely difficult to choose the optimal organizational and legal form without consulting competent specialists with extensive practical experience.
- Director and secretary of the company. The entrepreneur himself can take the post of director, but certain negative consequences follow from this. First, you need to apply for a work visa. Secondly, and much worse, the person will be noticed by the Federal Tax Service as a person who manages the company from the territory of his native state. Several other unpleasant consequences follow from this. Another option is to use a nominee service. This method has many advantages, but some disadvantages should also be taken into account. The final decision on the post of director should be made only after careful analysis and study of the situation.
An individual who is a resident of Singapore can become a company secretary. The secretary is the business manager of the firm. Nominee service, as in the case of a director, also has its pros and cons.
- Legal address. How to start up a business in Singapore? As already mentioned, it is much more correct to be physically present in Singapore and conduct business from there. Only actual presence minimizes risks, most of which are associated with possible blocking of accounts, claims of regulators, and denial of banking services. With this in mind, it is not recommended to have only a legal address but to conduct business from another country. It is much more efficient to focus on a full-fledged business.
However, if there is a desire to minimize costs, at least at the first stages, there are tools for resolving the issue with a legal address. The company receives an address only on paper; no activity is carried out on it. This is a cheaper but also more risky option.
- Company constitution. Until 2014, the main documents of any company were a memorandum and articles of association. But after the adoption of significant amendments to the Companies Law, such a document as the constitution was introduced. It must contain the following mandatory information about the legal entity:
- Surname, name, and patronymic of the director of the company
- The size of the authorized capital
- Organizational and legal form
- Legal address.
To correctly fill out the constitution, you need to download the template on the official ACRA portal, and in no case should you use sources of information of dubious origin.
- Bank. Choosing a bank is quite a crucial moment for starting up a business in Singapore. There are two options for opening a bank account with a banking institution in Singapore or outside of it. When choosing the optimal bank, you need to build on several important parameters:
- Requirements for the client and account balance
- Simplicity and timing of opening an account
- Terms of Service
- Additional services (corporate cards, profitable financing programs, etc.).
Preparation for registration and the procedure itself
Before starting up a business in Singapore, all the details and nuances are once again discussed with the client and, if necessary, corrections are made. This is very important since it will be quite difficult to change anything after the start of the procedure.
Conventionally, the registration procedure can be divided into the following stages (may differ slightly, depending on the characteristics of the company and other points):
- Verification and preparation of documentation.
- Registration directly.
- Create an account and activate a personal account at the Inland Revenue Office of the Internal Revenue Service of Singapore.
- Obtaining licenses and all necessary permits.
- Opening a corporate account.
According to official figures, all this takes from two to three days. But, as practice shows, it takes a little more time to register since you often have to face various difficulties and unforeseen circumstances.
- Additional procedures. Additional activities are carried out only if the company has a real representative office in Singapore. Setting up a full-fledged representative office, as opposed to registering a virtual office, is a more complicated procedure.
You may need to carry out the following activities:
- Selection and recruitment of staff. It is advisable to choose competent employees who will do the job efficiently, and not just be present in the office and receive wages.
- Registration for GST (this is an analog of the well-known VAT).
- Search for sources of additional funding. If the project is promising, the search for investors will not take much time and effort, especially if everything is done correctly.
- Arrangement of the office (renovation, purchase of the necessary equipment, and other organizational issues).