For businesses that hope to move into Singapore, it is critical to follow several specific steps to allow you to set up a legal business
If you are searching for incorporation options in Singapore, you are at the right place because in this article you will learn about the most popular business entity option in Singapore applicable for all foreigners.
A foreigner can register for a private limited company in Singapore. He can also advance to Singapore to manage the business on its own. He may also have a choice to hire a Resident Director if he doesn’t want to go to Singapore and wish to drive the business remotely from anywhere in the world.
Singapore is one of the world’s most suitable countries to start a business. It is considered the best business market for several reasons. The inducement of various governments is also one of the reasons people like to start their business in Singapore. Furthermore, the country yet maintains its status of being superior in the field of business.
Potential foreign investors think first about Singapore whenever they wanted to commence their business. Some people desire to manage their Singapore business from their hometown while other plans to stay in Singapore to handle all the things personally. Well, in this article you will find options for both of the above conditions.
How to start your business in Singapore
The most necessary thing to get started is to choose the business entity to incorporate. If you are a foreigner, you need to retain the assistance support of a professional corporate service provider. For this purpose, an application is submitted for incorporation through the electronic portal of the Accounting and Corporate Regulatory Authority also known as ”ACRA”, a national company registrar.
To submit an application for setting up the Singapore business entity, you will require a SingPass and a complete set of incorporation document that is to be created and forms part of the statutory file of the legal entity. You can consider either engaging a law firm or a professional services provider to assist you with both the above as this is commonly outsourced to avoid non-compliance, and to ensure smooth sailing throughout this straightforward yet complex process.
The incorporation procedure in Singapore is considered the fastest globally. If the initial preparation work is well managed, the Singapore entity can be incorporated within one-two working days, depending on the registrar (ACRA) and other government bodies that analyze your application. If there are any objections to your application, it may take more time (up to two weeks) than usual or your application might get rejected upfront.
Engaging an experienced professional corporate service provider can be critical as they can share important information and guide you in starting your business in Singapore. It depends on the specific data needed for the application process. You have to prepare the following details of your business for the application.
In Singapore, the need for the least paid-up capital is somehow meaningless and it also does not demand any bank statement. However, when setting up the corporate bank account for the legal entity, a low paid-up capital can sometimes affect the outcome of the account opening application. Having a corporate bank account is mandatory post-incorporation, otherwise, you will not be able to execute business transactions via this business entity.
There is a legal requirement for the incorporated company to have a local registered office address. The appointed resident director needs to be either a citizen, a permanent resident (PR), or an Employment Pass (EP) holder in Singapore.
For reference, individuals who hold Permanent Resident (PR), Entre-Pass, or Employment Pass (EP) holders stand under the definition of ordinary residents of Singapore. Including a local citizen, these candidates can qualify to hold the resident director appointment for the Singapore entity.
Incorporating a Company and Relocating to Singapore to Run Your Business
A foreigner will need a valid employment status like the Employment Pass (EP) or Entry-Pass to relocate themselves to Singapore. These passes can be applied only once the company is incorporated. Consequently, the foreign entity can decide to set up its services in Singapore from the following given options:
Private Limited Company and Employment Pass
This option means that the foreign corporation incorporates a fully owned subsidiary company that has a limited number of shares. The foreign employee of that subsidiary company can qualify for an Employment Pass (EP) if the individual, and the position offered, meet the criteria and requirements for the EP scheme.
Private Limited Company and Entre-Pass
This option refers that the foreign corporation (usually an individual entrepreneur hence the name “Entre”) incorporates a fully owned subsidiary company. The employee (usually the Entrepreneur him/herself) of that subsidiary company can qualify for an Entre-Pass provided all requirements are met. The company also has limited shares.
A resident director is needed for both the above options during the incorporation process as that is a mandatory requirement to appoint one. Therefore, a nominee director can be employed to meet such legal demands and perform the director’s duties, while the employee’s employment pass or Entre-Pass is in the process of approval. Outsourcing the resident directorship role is a popular interim strategy to ensure no commercial plans are held back as the Singapore entity can legally enter into contracts and fully operational before the employee’s resident status is updated.
Many foreign companies will commonly consolidate their business contracts in the region through this Singapore entity concurrently so as to maximize its tax benefits due to the unique position that this company brings to the parent business.
Application for Entre-Pass VS Employment Pass
The rules for Employment Pass acceptability are conditioned and the focus is steered on the applicant, the position offered, rather than the business that is sponsoring the application, which seems quite easy to most. But it is becoming extremely difficult to obtain an Employment Pass as the governing authorities put up a strong filter in order to attract the right caliber of foreign talent to up-level the country’s competitive workforce.
Therefore, you are strongly recommended to partner up with a qualified and licensed employment specialist to assist with such an application. These agencies can provide important advice and help with the entire application comprehensively until the issuance of the approved pass is completed with the Ministry of Manpower Being guided accurately can save you months of effort and needless waiting on the application process.
Thorough preparation is required for the Entre-Pass. It includes the submission of a lengthy business plan of at least 10 pages with complete details of your business aims and objectives for the next 5 years including a clear projection on revenue, growth and commercial strategy to ensure you will be on track.
Before starting a business, it is important to research the industries that are doing great in Singapore and the industries that are growing rapidly with the support of the government and what schemes can you leverage to smoothen your development.
Industries that show the potential to grow, or a focus industry by the different government agencies (e.g. fintech), have a higher value naturally and needless to say, will be able to qualify for better benefits from more government incentives and support from recognized institutions. It is also common that an established business in Singapore becomes a key sponsor for the business, hence finding that connection can really boost your journey here in Singapore.
Singapore has also been packed with a very active, experienced, qualified, and diversified workforce. Therefore the expectations of the workforce are remarkably uplifted compared to its country rivals in this region. It is also important to note that a person can apply for Employment Pass only when the incorporation of the company is conducted. The processing period is faster than Entre-Pass by at least 50%.
It must be applied within a limited time of about six months of incorporation. If you want to apply for Entre-Pass, make sure that all your documents and files are ready so as to facilitate the entire process and shortened the duration to within the period of six months. That is achievable unless the application is rejected.
Incorporating a Company and Running Your Business from Overseas
If the foreign investor is willing to manage their business in Singapore from elsewhere there is an option to hire a resident director to fulfill the duties of a director. It can be a qualified individual that you trust or a nominee director appointed through a professional services provider. It is recommended that you consider engaging a more capable service provider so that your accounting and tax compliance requirements are also managed at the same time to avoid multiple touchpoints when managing the entity remotely.
Engaging a Resident Nominee Director
One should appoint a responsible and qualified director because the duties of a resident director are critical depending on which stage your business is progressing into. Is it an extremely common practice to outsource this role to an experienced corporate secretarial service provider in other for them to better manage the initial incorporation process and all relevant documents that form up the statutory file of the business entity.
A director of the company is responsible for all the company operation, well-being and also ensures its statutory obligations are met, such as the filing of estimate chargeable income, final returns for each financial year, and payment of the taxes to the Inland Revenue Authority of Singapore. The director is fully liable and officially represents the legal entity here in Singapore.
That is the reason many locals don’t desire to do this job or they may set various conditions to protect themselves in any delicate situation. A resident director should have the following characteristics as specified under the Companies Act:
- The company must submit its own annual audited accounts.
- The company must submit annual audited accounts of the head office.
The Subsidiary Company
The Subsidiary Company is a Private Limited Company whose major shareholder is the corporate entity. The company can be 100% owned by a foreign entity. It can conduct its relevant business activities in Singapore and can also repatriate all of its earning. The Subsidiary Company can also have as many employees as the company demands.
If a foreign company wants to register a foreign company they must meet the following statutory requirements:
- The nominee should be a fair-minded person of over 18 years of age (corporations can not be a director).
- The executive would not be un-discharged bankrupt by the Singapore or international court.
- The person must not be an inexperienced director of an indebted company.
- The person should not be a director of such a company that was strained on grounds of national security or affair.
- The person has not been charged for any crime including fraud or corruption.
- He has not been found at fault in Singapore of any crimes related to the development or administration of the corporation.
- The person must not find guilty of more than three offenses over the last five years in connection to the terms of the Companies Act.
- It should not be directed to a disqualification order under section 34.35.36 of the bounded Contract Partnership.
When appointing a resident director on your own, it is also vital to note that it is important to have a sound relationship and have ongoing communication with the appointed director for your choice. This is because the director needs to be absolutely clear on what is happening on the ground, otherwise, he/she reserves the right and can decline to approve or sign any document that requires his/her signature in order to move on. It becomes challenging for the company to move forward. If your relationship with the resident director turns negative and he/she decides to resign from the position, the company has to clamber to find a replacement urgently and that can be a very costly exercise. In such a situation, you must immediately appoint a fresh resident director before the resignation of your current director and have all proper documentation prepared and submitted to update the registrar (ACRA) of the change in directorship. This is unlikely to happen if the appointment is managed through a professional service provider.
The most popular approach by foreigners is to set up the private limited business entity and adopt the Employment Pass (EP) scheme. There are many reasons for that, firstly, the application process and commitments of Employment Pass are much easier to fulfill compared to the Entre-Pass. Secondly, setting up a private limited entity is easy when the process is properly managed with expert guidance.
Lastly, partner up with a professional services provider who can cover all services that you need to progress with your plans. Outsource all key local roles (e.g. company secretary, resident director), set up the business entity, and have ongoing bookkeeping and tax compliance managed. Such a provider must be able to help manage or guide you on work permits and immigration matters when an Employment Pass (EP) for a foreign employee is involved. All of this will ensure you have a smooth journey when setting up your business here in Singapore.