Technological advancements have made the process of setting up businesses so simple in this fast-changing world in we live.
If you want to start your business in Singapore, take a look at this “all-in-one” guide which gives key tips and simple actions required to go through the process of Company Formation in Singapore smoothly. The stable political environment, low-taxing policies, government supported grants and a lot of talent base make the country increasingly attractive to international business venture owners.
In this complete guide on setting up a company in Singapore, let’s traverse step-by-step through the nuances of forming a company in Singapore. As whether you are a seasoned entrepreneur looking forward to growing your wings, or a fresh new bee in the hive just buzzin’ to start your own company, knowing the nitty gritty about how to set up a company in Singapore makes all the honey.
10 Key Considerations for Company Formation in Singapore:
1. Choosing the Right Company Name
When choosing your company name, it’s vital to align it with the guidelines set by ACRA, Singapore’s regulatory authority. ACRA prohibits names that are obscene, religious, or identical to existing entities.
2. Determining the Company Type
While several entity structures exist in Singapore, the Private Limited company (Pte Ltd) remains the most popular choice for businesses of all sizes. The Pte Ltd companies offer a number of advantages including:
Limited liability protection: Pte Ltd companies are legal entities separate from the owners which means that the personal assets of the owners are protected if the company goes bust or goes bankrupt.
Tax benefits: Pte Ltd companies corporate income tax rate of 17% which is one of the lowest in the world. On the other hand tax exemptions and incentives are also available for Pte Ltd companies such as partial tax exemptions for new start-ups
Other entity structures such as sole proprietor and limited liability partnerships (LLPs) do not have the same level of liability protection and tax benefits compared to Pte Ltd companies. For example, sole proprietors are personally liable for the debts and liabilities of their business while LLP partners are liable for the debts and liabilities of the LLP up to the amount of their capital contributions.
Therefore if you are considering starting a business in Singapore it is generally advisable to setup a Pte Ltd company structure. Pte Ltd company structure will provide you with the limited liability protection and tax benefits that you need to grow your business successfully.
3. Business Activities:
It is crucial to have a clear understanding of the Singapore Standard Industrial Code (SSIC) assigned to your business. The Singapore Standard Industrial Code (SSIC)’s main function is for ACRA to identify whether your business requires specific licenses to operate. By accurately determining your SSIC code you can ensure compliance with regulations and avoid potential legal complications down the road.
To determine your SSIC code, you can use the SSIC Search tool on the BizFile website. Simply enter the keywords that best describe your business activities and the search tool will provide you with a list of relevant SSIC codes. You can then select the code that most closely aligns with your business activities.
Once you have determined your SSIC code, you can check the ACRA website to see if any specific licenses are required for businesses with your SSIC code. It is important to note that some of the SSIC codes require multiple licenses so it is important to do your research thoroughly.
If you are unsure about which SSIC code to select or whether you need a license, you should talk to our expert.
4. Appointing a Resident Director
One of the key requirements for company formation in Singapore is the mandatory appointment of at least one local resident as a director.
Why is a Resident Director Required?
A resident director is required for a number of reasons, including:
- To ensure that the company has a local representative who is familiar with Singaporean laws and regulations.
- To bridge the gap between between the company and the government.
- To hold the company accountable to Singaporean law.
Who Can Be a Resident Director?
A resident director must be an individual who is ordinarily resident in Singapore. Meaning that they must have a permanent address in Singapore and must spend at least 183 days in Singapore in any 12-month period.
Foreign entrepreneurs can appoint a resident director in a number of ways:
Partner with a local resident: Partner with a local resident: Partnering with a Singaporean is a common option for foreign entrepreneurs who have a local friend or business associate who is willing to serve as a director of their company.
Hire a professional director service: There are a number of companies in Singapore that offer professional director services. Professional director services can be a good option for foreign entrepreneurs who do not have a local contact who can serve as a director of their company.
Appoint a nominee director: The nominated director is a third party appointed to act as a director of the company on behalf of the beneficiaries. The nominee directors are typically one of the good options for foreign entrepreneurs who do not have a local resident who can serve as a director of their company.
5. Understanding Work Visas:
Foreigners who are looking to establish a business presence in Singapore must understand the work visa options available. Singapore offers two primary types of work visas:
EntrePass: The EntrePass is designed for foreign entrepreneurs and exceptional talents who want to start and operate their businesses in Singapore. Foreigner in order to qualify for an EntrePass need to meet specific criteria related to their business plan, innovation and financial viability and it’s most suitable for those looking to launch innovative startups or engage in entrepreneurial ventures.
Employment Pass (EP): The Employment Pass, on the other hand, is suitable for foreign professionals, managers, and executives who are planning to work in managerial or specialized roles within existing companies or newly established ones in Singapore. The EP is typically sponsored by the hiring company and is subject to certain eligibility requirements, such as minimum salary thresholds.
Selecting the right work visa depends on your individual circumstances and business goals. Entrepreneurs must ensure compliance with the appropriate visa category is essential for a smooth transition to living and working in Singapore while pursuing their business objectives.
6. Hiring a Qualified Company Secretary
A qualified company secretary in Singapore is a person or company with the necessary knowledge and experience to perform the duties and responsibilities of a company secretary This includes a good understanding of Singapore company laws and regulations and practical aspects of company management around.
Under the Companies Act, the company secretary must be a resident of Singapore. This means having a permanent address in Singapore and spending at least 183 days in Singapore in any 12-month period.
In addition, the company secretary must be a member of a professional body recognized by the Accounting and Corporate Regulatory Authority (ACRA). These professional bodies include the Chartered Secretaries and Administrators (ICSA) and the Society of Company Secretaries (SCS).
If the company secretary is a corporate entity, it must be a company registered in Singapore. The company must also have at least one individual who is a member of a professional body recognized by ACRA.
Here are some of the key duties and responsibilities of a company secretary:
- Advising the directors on the company’s legal and regulatory obligations
- Assisting with the preparation and filing of incorporation documents
- Maintaining the company’s statutory registers and records
- Convening and organizing board meetings and general meetings
- Filing annual returns and other statutory filings with ACRA
- Ensure company complies with the requirements of the relevant government agencies
It is important to hire a qualified company secretary if you are planning to setup a business in Singapore. The company secretary will ensure the company complies with all the local laws and requirements.
7. Defining the Financial Year End (FYE)
Fiscal Year End (FYE) is the date on which a company’s fiscal year ends. It is important to choose an FYE that suits your business, as it will impact your tax planning and reporting obligations.
In Singapore, the default FYE is December 31st. However, companies can choose to have a different FYE, provided that it is approved by the Accounting and Corporate Regulatory Authority (ACRA).
Few factors to consider when deciding on Financial Year End (FYE):
Your business cycle: It is important to decide the Financial Year End (FYE) that coincides with the end of your business cycle to prepare the financial statements and tax returns.
Your tax planning: Some tax breaks in Singapore are only available to companies with a certain type of FYE. For example, startups can qualify for a partial tax exemption for the first three years of operation, but the exemption is only available to companies with an FYE of December 31st.
Your reporting obligations: You will need to file your financial statements and tax returns with ACRA within a certain period of time after your FYE. Make sure that you choose an FYE that gives you enough time to prepare and file your reports.
If you are unsure which FYE is right for your business, you should talk to our expert or schedule a call now.
8. Understanding Shareholding
Shareholders have specific rights that underline their central role in the company’s ecosystem including the fundamental right to earn shares meaning they have a financial stake in the company’s success and profitability. Moreover, shareholders are charged with responsibilities commensurate with their rights.
They are expected to use their voting power tactfully, communicate clearly with company leadership, and contribute to the overall good of the organization. Essentially, shareholders are not passive spectators but active participants in the company’s journey.
Ordinary shareholders: Ordinary shareholders have the most control over the company’s future and operation. Ordinary shareholders have the right to vote on matters such as appointing a board of directors and major company transactions.
Preference shareholders: Preference shareholders do not have the right to vote. One of the primary distinctions is that preferred shareholders have a preference when it comes to the payment of dividends. They are entitled to receive a fixed dividend amount or a predetermined percentage of the company’s profits before ordinary shareholders receive any dividends.
Redeemable preference shareholders: Redeemable preference shareholders have the same rights as preference shareholders, with the added right to have their shares redeemed by the company.
Convertible preference shareholders: Convertible preference shareholders have the same rights as preference shareholders, with the added option to convert their shares into ordinary shares.
Treasury shares: Treasury shares do not have any control or rights over the company’s future and operation.
It is important to emphasize that the specific rights and obligations of shareholders may differ substantially depending on the company’s constitution and the legal framework of the country of registration. You also need to consider what kind of share you are giving them and what opportunities that share has.
9. Registered Address & Constitution
Your registered address is where all official communication goes. While you don’t need to operate your business from this address, it must be accessible to the public.
A typical constitution includes provisions related to share capital, share classes, voting rights, board meetings, appointment and removal of directors, dividend distribution, and other important corporate matters. Legal Requirement: In many jurisdictions, including Singapore, companies are required to have a constitution. In cases where a company does not adopt its own constitution, the default rules and regulations specified by the relevant company law will apply.
10. Opening a Business Bank Account
When opening a business bank account in Singapore, it’s vital to select the appropriate bank, gather essential documents including business registration, and understand associated fees.
Consider the purpose of the account, whether it’s for daily operations or international transactions, and assess if online banking and mobile apps are available.
Conclusion
If you are ready to start your entrepreneurial journey in Singapore, FastLane Group can help. Contact FastLane Group today to get started on your company formation journey.