What to take note when setting up company in Singapore

Setting up a company in Singapore can be a strategic and rewarding decision due to its strong economy, business-friendly policies, and strategic location in Asia. However, to ensure a smooth process, there are essential considerations to keep in mind. This guide will outline the key steps and factors to consider when setting up a company in Singapore, helping you navigate the regulatory landscape and take full advantage of the country’s robust business environment.

1. Understanding the Types of Business Structures

Singapore offers several business structures, each with its own benefits and requirements. Selecting the right structure depends on factors such as the nature of your business, the number of owners, and your long-term objectives. The main business structures include:

• Private Limited Company (Pte Ltd): This is the most common type of business entity. It offers limited liability to its shareholders, meaning personal assets are protected if the company incurs debts. A Private Limited Company can have up to 50 shareholders.
• Sole Proprietorship: This is suitable for individuals who wish to own and manage the business by themselves. However, the owner is personally liable for all business debts, which makes it a riskier option.
• Partnership: In a partnership, two or more individuals share ownership and liability. There are General Partnerships (where partners are personally liable) and Limited Partnerships (where some partners have limited liability).
• Limited Liability Partnership (LLP): This hybrid structure offers the flexibility of a partnership with limited liability protection. It is ideal for professional services firms, like law firms or accounting firms.
• Branch Office or Representative Office: Foreign companies can set up a branch office or a representative office. A branch office is a legal extension of the parent company and can conduct business in Singapore, while a representative office is for market research or liaison purposes and cannot engage in commercial activities.

Choosing the right structure is critical, as it influences your tax obligations, compliance requirements, and level of personal liability.

2. Meeting the Minimum Requirements

When establishing a company in Singapore, certain legal requirements must be met, including:

• Directors: A Private Limited Company must have at least one director who is a resident of Singapore, which can be a Singapore Citizen, Permanent Resident, or a person with an EntrePass, Employment Pass, or Dependant Pass. Directors are responsible for the company’s compliance with regulations.
• Shareholders: There can be a minimum of one and a maximum of 50 shareholders. Shareholders can be individuals or corporate entities, and 100% foreign ownership is allowed.
• Company Secretary: Within six months of incorporation, a company must appoint a qualified company secretary who is a resident of Singapore. The secretary is responsible for ensuring compliance with statutory requirements.
• Paid-up Capital: The minimum paid-up capital for a Private Limited Company is just S$1. However, businesses in specific industries may have higher capital requirements.
• Registered Address: The company must have a physical Singapore address that is not a P.O. Box. This is where official correspondence and notices are sent.

3. Choosing a Unique Business Name

Choosing an appropriate and unique business name is essential. The name must be approved by the Accounting and Corporate Regulatory Authority (ACRA) and must not infringe on existing trademarks. Certain words that imply specific business activities, such as “bank,” “finance,” or “legal,” require special approval from relevant government agencies.

To ensure your business name is available and meets regulatory standards, you can use ACRA’s BizFile+ portal to search and register your desired name.

4. Registering Your Company with ACRA

Once you have determined your business structure, met the minimum requirements, and chosen a name, you need to register your company with ACRA. The registration process is straightforward and can be completed online through the BizFile+ portal. The key steps include:

1. Name Approval: Submit your business name for approval, which usually takes a few hours unless further verification is required.
2. Prepare Registration Documents: These include the company’s constitution, particulars of directors, shareholders, and the company secretary, and details about the registered address.
3. Submit and Pay the Fees: The registration fee for a Private Limited Company is S$300. Once the application is submitted, ACRA typically processes it within a day.

After successful registration, ACRA will issue a Certificate of Incorporation and a Unique Entity Number (UEN), which serves as the company’s identification number for transactions with government agencies.

5. Understanding Taxation and Compliance Requirements

Singapore’s tax regime is highly competitive, with a corporate tax rate of 17%. Additionally, new companies can benefit from tax exemptions and incentives. Key points to consider include:

• Corporate Tax Exemptions: New companies can enjoy full tax exemption on the first S$100,000 of chargeable income for the first three consecutive years, with partial exemptions on the next S$100,000. This scheme is ideal for startups.
• Goods and Services Tax (GST): Companies with an annual turnover exceeding S$1 million must register for GST. GST is currently at 8% and applies to the supply of goods and services within Singapore.
• Annual Filing Requirements: Companies must file annual returns with ACRA and tax returns with the Inland Revenue Authority of Singapore (IRAS). The financial year end can be any date within 12 months of incorporation.
• Statutory Audits: Companies with more than 50 shareholders or that do not meet the small company criteria must undergo an annual audit. Small companies are exempt from audits if they meet at least two of the following conditions: (1) total revenue not exceeding S$10 million, (2) total assets not exceeding S$10 million, and (3) no more than 50 employees.

6. Setting Up a Corporate Bank Account

A corporate bank account is essential for managing your company’s finances. Major banks in Singapore, such as DBS, OCBC, and UOB, offer various types of business accounts. To open an account, you typically need to provide:

• A copy of the company’s Certificate of Incorporation
• The company’s Constitution
• A resolution passed by the company’s board of directors approving the opening of the account
• Proof of identity for all directors and authorized signatories

Banks may also require a minimum initial deposit, depending on the type of account chosen.

7. Applying for Necessary Business Licenses and Permits

Some industries in Singapore require special licenses and permits to operate legally. Examples include:

• Food and Beverage (F&B): F&B establishments must obtain a food shop license from the National Environment Agency (NEA).
• Financial Services: Companies dealing in financial services may need a license from the Monetary Authority of Singapore (MAS).
• Retail: If selling tobacco or alcohol, additional licenses are needed from the Health Sciences Authority (HSA) and Singapore Customs.

Check with relevant authorities to ensure compliance with all regulatory requirements for your industry.

8. Understanding Employment Regulations and Hiring Staff

If you plan to hire employees, it’s essential to understand Singapore’s employment laws. Key considerations include:

• Employment Passes and Work Permits: Non-residents who wish to work in Singapore require an Employment Pass, S Pass, or Work Permit, depending on their qualifications and job type.
• Central Provident Fund (CPF): Employers must contribute to the CPF for Singapore Citizen and Permanent Resident employees. CPF contributions go toward retirement, healthcare, and housing needs.
• Employment Act Compliance: The Employment Act sets out minimum employment standards, including working hours, overtime, leave entitlements, and termination procedures.

9. Leveraging Singapore’s Business Incentives

Singapore offers various grants and incentives to encourage business growth and innovation. Notable schemes include:

• Startup SG Scheme: Provides funding support for early-stage startups through grants, loans, and equity financing.
• Productivity Solutions Grant (PSG): Supports SMEs in adopting technology and productivity solutions.
• Enterprise Development Grant (EDG): Aims to help businesses grow and transform through funding for innovation, capability building, and market access.

10. Seeking Professional Assistance

Navigating the company setup process can be complex, especially for foreign entrepreneurs unfamiliar with Singapore’s regulatory environment. Engaging a professional services firm for corporate secretarial, tax, and accounting assistance can be beneficial. Many firms offer comprehensive incorporation packages that handle everything from name registration to tax planning.

By following these steps and taking note of Singapore’s regulatory requirements, you can establish a strong foundation for your business and position yourself for success in one of Asia’s most vibrant economies.