It ranks first in Asia as an innovation hub, second easiest place in the world to do business, and companies can be set up within 15 minutes (fastest in Southeast Asia).
For those who are making the leap, we set out the three main steps for starting a company in Singapore.
Step 1. Choose the Correct Business Structure
While a limited liability company is the most popular form of business structure in Singapore, there are several other options available. All these options should be considered before you start a company in Singapore.
The main different types of business structure in Singapore are:
- Sole proprietorship/sole trader. The sole proprietor business form is the default business structure in Singapore, and in most countries with legal systems descended from the British legal system. As a sole proprietor, there is no distinction between the entrepreneur and the business under the law: This means that the entrepreneur has unlimited personal liability for the activities of the company, and the individual is taxed according to personal income tax rates
- General partnership. In a general partnership, two or more individuals join forces to run a business together. Profits are split between the partners according to the size of their partnership interest, and partners have joint and several liability for the operations of the business
- Limited partnerships and limited liability partnerships (LLPs). In a limited partnership, at least one of the partners has unlimited liability, and one or more partners have limited liability. In an LLP, all partners have limited liability
- Limited companies. Limited companies in Singapore come in several varieties: An exempt private company has between 1 and 20 shareholders, and is exempt from many of the regulatory and tax requirements of a larger company; A private company limited by shares has between 20 and 50 shareholders; A company with 50 or more shareholders must be incorporated as a public limited company.
Step 2. Prepare and Submit the Necessary Documentation
Once you have decided to start a company in Singapore, you need to establish a few key matters: This includes working out your initial share capital, shareholders, and company name and address.
Consider:
- Shareholders. Shareholders contribute capital for starting a company, and in return receive an ownership interest in the company. One ownership interest is known as a ‘share’, and collectively they are known as ‘shares’ or ‘stock’. Each ordinary shareholder has a vote at general meetings, and collectively shareholders can appoint and replace directors, and ultimately wind up the company
- Share capital. Minimum share capital is S$1 in value, and there must be at least one share issued. On winding up of the company, the contribution of share capital can mean a payout for shareholders (though they stand in line behind all creditors)
- Directors. Directors have overall responsibility for managing the affairs of the company. You can appoint anyone as a director of your Singapore company as long as they meet the key criteria: This means being a natural person, 18 years or older, and with full legal capacity. At least one director must reside in Singapore and hold a relevant citizenship or visa status. Note, bodies corporate/companies cannot themselves be appointed as a director in Singapore
- Company address. You must establish a permanent address for your company within Singapore. This must be a physical address; a PO Box will not be sufficient
- Company name. You must apply for approval of the name of your company. It cannot pay the name of any existing Singapore company. Note that approval of the name of your company does not provide you with a trademark in that company name
- Submit documentation ACRA. The Accounting and Corporate Regulatory Authority (ACRA) must receive all relevant documentation, including a company constitution (setting out the core rules of the company), ‘consent to act’ forms for the directors, and information relating to the shareholders. Where corporate shareholders are involved, information about the original registration of that company, and the ownership structure, is required. All of this should accompany the incorporation application form that is submitted.
Step 3. Organize Ongoing Compliance
Once a company has been incorporated in Singapore, you can then carry out a range of steps: You can open a bank or business account, and also appoint your ‘company secretary’ (the company secretary must be appointed within six months of establishment). Company secretaries carry out core administrative and governance activities for the company in Singapore, and are the company’s primary liaison with regulators. They must be based in Singapore, and meet the necessary qualification requirements.
Companies must submit audited financial statements and annual returns every year (unless explicitly exempted from the requirement to do so under the Companies Act 1967).
The company should also ensure that it has any other registrations that might be required for a company of that type. For example, financial services providers need a financial services license to operate in Singapore.
The company should also check whether it is obligated to register for goods and services tax (GST) — GST is an indirect tax of 7%. Generally speaking, companies with a projected or actual annual revenue of more than $1,000,000 must register for GST.
Conclusion
Singapore is a relatively straightforward country to open up a local company. Here we have set out the key steps you need to consider when doing so: One, think about the correct business structure; Two, prepare documentation and apply for incorporation; Three, organize ongoing compliance.
