Foreigner’s Guide for Starting a Business in Singapore

Guide to Starting a Business

Singapore is an excellent location for global entrepreneurs and investors to start a business. For the past 12 consecutive years, the city-state has consistently ranked among the world’s top three economies in terms of ease of doing business. It is also the most competitive country in its region and a global hub for trading, technology, innovation, and innovation.

With this, the following are some of the most important information foreigners need to know before embarking on their entrepreneurial journey in Singapore.

Top 5 FAQs for Foreigners in Starting a Business in Singapore

  1. Can a foreigner set up a business in Singapore?

    Yes, a foreigner can set up a business in Singapore with the following three options:

    Option 1: Set up a Private Limited Company then apply for an Employment Pass

    Option 2: Apply for an EntrePass + Set Up a Private Limited Company

    Option 3: Appoint a Local Nominee Director (if relocation is not applicable)

  2. Can a foreigner register a sole proprietorship?

    Yes, s(he) can. However, this can only be legally allowed by appointing an authorised representative on her/ his behalf. This individual must be a Singapore citizen, a Permanent resident, or someone with an EntrePass work visa.

  3. Can a foreigner register a partnership?

    Yes, s(he) can as long as the other partner is a Singapore ordinarily resident. Otherwise, there should be an authorised representative on your behalf like in the condition for Sole Proprietorship.

  4. Does a foreigner need to reside in Singapore to set up a Singapore company?

    No. However, if relocation is not applicable, it is necessary to appoint a local nominee director in compliance with the Singapore Companies Act for foreigners.

    Securing an Employment Pass or EntrePass is not required if there is no intention to relocate to Singapore.

  5. How can a foreigner get an Entrepreneur Pass?

    To be eligible for an Entrepreneur Pass (EntrePass) work visa, the following criteria must be fulfilled:

    • A foreigner has already applied a private limited company with ACRA
    • A foreigner has registered the company for not more than six months from the application date
    • A foreigner has fulfilled the required qualifications as an entrepreneur, innovator or investor

Essential Eligibility Requirements for Starting a Business in Singapore

  1. Visa/Work Pass

    It is necessary to acquire the right visa/work pass to be legally allowed to start a business in Singapore.

    • If there is an intention to relocate and work in Singapore, there is a need to acquire either an Employment Pass (EP) or an EntrePass. This will also give the foreign applicant the right to act as a local director of his or her start-up company.
    • If relocation to Singapore is not applicable, there is a need to appoint a nominee resident director in compliance with the statutory requirement.
    • A foreigner can choose from different entry options to set up a Singapore company: a subsidiary, a branch office, a re-domiciliation, or a representative office
  2. Company Name

    To get fast approval for the name application, it must not contain inappropriate, misleading, or vulgar words; must not be related to any of the national symbols or government agencies; and, must not be identical to existing business entities.

  3. Director

    It is required to appoint at least one Resident Director. This individual must be a natural citizen, permanent resident, or an individual with a legal work pass. Directors need not be shareholders.

    There is no restriction to the number of local or foreign directors that can be appointed, provided he or she has fulfilled the following requirements:

    • The individual is not lower than 18 years of age
    • The individual has no bankruptcy issues
    • The individual has no criminal record
  4. Shareholders

    It is required to have at least one shareholder. A shareholder can be either a resident or a non-resident individual or corporate entity. The company can have as many as 50 shareholders.100% foreign ownership is allowed.

  5. Company Secretary

    A qualified company secretary has to be appointed within six months of business incorporation in compliance with the Singapore Companies Act (Section 171). This individual must be a natural resident. Neither a shareholder nor a sole director is eligible to be a company secretary.

  6. Paid-Up Capital

    This refers to the total amount of shareholders’ fund. A minimum paid-up capital of SGD 1 is necessary for setting up a new private limited company. The total amount can be increased at any point in time after the company’s incorporation.

    For a foreigner applying for an Employment Pass, it is recommended to provide at least SGD 100,000 of paid-up capital for the following reasons:

    • A requirement for companies undertaking specific government projects
    • Creates a good first impression on prospective clients

    Note: A higher paid-up capital does not guarantee or hasten the approval of a foreigner’s application for a work pass.

  7. Company’s Registered Address

    This refers to a local physical location, either residential or commercial and strictly not a post office box (P. O. box). This address must be capable of receiving and acknowledging all official communications and notices as may be addressed to it.

  8. Taxation

    Newly-incorporated companies in Singapore are entitled to the following tax exemptions for the first three consecutive YAs:

    (For companies incorporated in YA 2019 and before)

    • Full tax exemption on the initial SGD 100,000 income
    • 50% tax exemption on the succeeding SGD 200,000 income

    (For companies incorporated in YA 2020 and beyond)

    • 75% tax exemption on the initial SGD 100,000 income
    • 50% tax exemption on the succeeding SGD 100,000 income

Choose a Business Structure that is Right for your Company

Registration ProcessBefore choosing a specific business structure, consider the following factors to determine if it is the best structure for your business:

  • The nature of the business
  • The amount of capital investment
  • The number of business owners
  • The variety of roles and responsibilities
  • The risks and liabilities involved
  • The specific advantage of that business structure in the event of dissolution
  1. Sole Proprietorship

    This is the most straightforward business structure ideally suited for low-risk businesses. It is owned by one person only.

    Pros:

    • Easy to set up and administer
    • Minimal registration cost
    • Complete control of all decisions in the company
    • Can own property under the business name

    Cons:

    • Not a separate legal entity from the owner
    • Exposure to unlimited liabilities throughout the business duration
    • Tax is computed at a personal tax rate
    • No continuity upon the owner’s retirement or demise
    • Difficulty in raising capital for business expansion
    • Annual registration renewal
  2. Partnership

    This is owned by two or more partners which can be either individuals or corporate entities. The number of partners should not exceed twenty. This is usually the preferred company structure for service providers such as lawyers and accountants.

    Pros:

    • Easy to set up and administer
    • Minimal registration cost
    • Foreigners can become the business owner as long as the other partner is a Singapore natural resident

    Cons:

    • Not a separate legal entity from the owner
    • Exposure to unlimited liabilities of the partner throughout the business duration
    • Tax is computed based on the partner’s personal tax rate
    • Continuity is dependent on the partnership’s agreement
    • Cannot own property under the business name
    • Annual registration renewal
  3. Limited Partnership (LP)

    This is owned by two or more partners which can be either individuals or corporate entities where at least 1 partner is a General Partner (GP) and 1 is a Limited Partner (LP).

    Pros:

    • No limit on the number of partners
    • Foreigners can become the business owner as long as at least one of the partner is a Singapore natural resident
    • Corporate tax relief is applicable (if the corporate partner is eligible)
    • The limited partner has limited liability

    Cons:

    • Not a separate legal entity from the owner
    • The general partner has unlimited liability
    • Business continuity is dependent on the partnership’s agreement
    • Cannot own property under the business name
    • Annual registration renewal
  4. Limited Liability Partnership (LLP)

    This is owned by a minimum of two partners which can be either individuals or corporate entities where at least one partner is a General Partner (GP) and one is a Limited Partner (LP).

    This is the preferred option for many start-ups because it combines the features of a partnership and a company. One of its defining characteristics is that the liability is determined by the actions or inactions of the partners.

    Pros:

    • No limit on the number of partners
    • Foreigners can become the business owner so long when there is at least one partner who is a Singapore natural resident
    • The separate legal entity from the owners
    • Corporate tax relief is applicable (if the corporate partner is eligible)
    • One-time registration
    • Perpetual succession (unless in the event of voluntary dissolution)
    • The limited partner has limited liability
    • Tax is computed based on the partner’s personal tax rate
    • More convenience and freedom in raising capital for business expansion

    Cons:

    • Moderate difficulty in setup and compliance costs as compared with a sole proprietorship
    • The general partner has unlimited liability
    • Difficulty in the transfer of business ownership
  5. Private Limited Company

    This refers to an LLC owned by an individual/s or entity/entities not exceeding to 50 persons. Most foreign entrepreneurs choose this type of business structure due to its flexibility and scalability.

    Pros:

    • Foreigners can become the business owner so long when there is at least one partner who is a Singapore natural resident
    • Independent legal identity (separate from the owners)
    • The limited partner has limited liability
    • More convenience and freedom in raising capital for business expansion
    • Ease of business ownership transfer
    • Perpetual succession (unless in the event of voluntary dissolution)
    • Competitive taxation regime (Profits up to SGD 300,000 is at less than nine percent while profits exceeding SGD 300,000 is at 17 percent maximum)

    Cons:

    • Difficulty in setup and higher compliance costs
    • More stringent rules and regulations to follow as compared to sole proprietorship or partnership
    • Strict compliance with statutory requirements
    • Difficulty in the liquidation process

Company Registration Process

Registration ProcessThe Singapore Registrar of Companies is in charge of the company registration and compliance process. Below are the key steps for company registration in Singapore.

  1. Pre-Registration

    It is essential to reserve the company name and wait for approval before filing for company registration.

  2. Registration

    Foreigners who wish to set up an office in Singapore may approach these government agencies:

    1. ACRA (Accounting and Corporate Regulatory Authority) – regulatory agency for all businesses, accounting providers, and corporate entities in Singapore
    2. IRAS (Inland Revenue Authority of Singapore) – provides all necessary information about tax obligations for businesses
    3. MAS (Monetary Authority of Singapore) – regulatory agency for businesses in the banking, finance and insurance industries
    4. MOM (Ministry of Manpower) – in charge of issuing an applicable work pass for foreigners starting a business in Singapore
    5. LSRA (Legal Services Regulatory Authority) – in charge of issuing entity registration or licence for individuals and entities setting up a law firm

    The following documents should be provided upon application:

    • Approved Company Name
    • Brief Description of Business Activities
    • Registered Address
    • Company Secretary Particulars
    • Directors Particulars
    • Shareholders Particulars
    • Memorandum and Articles of Association (MAA)
  3. Post-Registration

    1. Certificate of Incorporation

      After successful registration of the business, the Company Registrar will send an email notification. This will contain the Company Registration Number which is the official certificate of incorporation of the company.

    2. Opening a Corporate Bank Account

      This is one of the essential things to do upon the company’s incorporation. Choose the bank whose corporate accounts features can best complement the needs and expectations of the company.

    3. Goods and Service Tax (GST) Registration

      This refers to the tax levy for all Singapore-manufactured goods and services as well as foreign-based products that are imported to the country, which is currently at seven percent.

      If the business is expected to generate over SGD1 million of annual taxable revenue, it is compulsory to register the company for GST.

      All companies, except for those in the financial services and real estate industry, must be registered to claim back the GST incurred on their business purchases.

Get Expert Guidance from the Professional

Starting a business in Singapore can be a seamless process when you engage in Corporate Services Singapore.

Their experience and expertise in all aspects of company incorporation – from business registration process and provision of company secretarial services to overseeing accounting functions and compliance requirements – can give you a good head start.

To set up a company in Singapore, reach out to Corporate Services Singapore today.

Posted in Company Incorporation.