10 things to consider before incorporating a new companyDownload Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
It has never been a better time to start a business! Technology has disrupted the traditional business landscape and even large incumbents are struggling to keep up with the rapid changes. The rise of the internet, digital marketing, e-commerce platforms and SaaS solutions has lowered the barriers of entry to starting a business to a new level and yet allowed new businesses access to a large population no longer constraint by borders or time zones.
The availability of freelancers and the gig economy allows new business owners to experiment without incurring fixed expenditures in the form of full-time staff. Singapore is an ideal location to start a business; politically stable, low tax rates, business-friendly government, large pool of accessible talents and hours away from major cities in Asia. Did we also mention the great food and how liveable the country is?
Who is eligible to set up a company in Singapore?
Well, unless you happen to be a Politically Exposed Person (“PEP”) or on an anti-money laundering blacklist, it is relatively straight forward for almost anyone to set up a company here. You may choose to work with a Registered Filing Agent (“RFA”) to incorporate your company where the RFA will be responsible for verifying the identities and conducting due diligence on the shareholders and directors. The RFA will also make the submission to the regulator (Accounting and Corporate Regulatory Authority or “ACRA”) on your behalf.
Here are 10 things to take note of when you decide to proceed with setting up a company in Singapore.
1. Choose an appropriate company name
Choosing a company name is often one of the most difficult tasks when you are starting a business. You may be thinking that the company name needs to reflect the brand image and product or service that you are offering, however, a company name can be different from your business name. For example, we do business as Sprout Asia, but our business entity is Sprout Corporate Services Pte. Ltd.
Notably, ACRA also has restrictions that your name cannot be obscene, religious or identical to other business names in use or reserved by other applicants. Let us know if you wish to find out if a certain company name is available and we can even reserve the name on your behalf! If you choose to have an online presence, it may also be worthwhile to check if your desired domain name is available.
2. Determine the company type
Private Limited structures are the most common
Singapore allows many different types of entity structures for a person to conduct business. The most common and highly recommended structure is the simple private limited company (Private Limited or Pte Ltd). The word “Limited” refers that you will have limited liability protection, meaning that your assets cannot be seized to pay off the company’s liabilities, unless you have provided a personal guarantee to creditors. The company will have its own profit and loss and will be taxed separately.
This separation of company and personal interests delineates your role more clearly and may allow the company to raise funds from investors or the company’s ownership or shares to be sold off in the future. A “Private” company allows up to 50 shareholders, while at the same time, benefits from lower reporting and compliance requirements as compared to a public company.
This structure is recommended as opposed to a sole proprietorship or limited liability partnership (LLP) for many reasons but most of all, for the tax savings that are only available for private limited companies.
3. Business activities
A Singapore Standard Industrial Code (SSIC) is a business activity code assigned by the government to track economic activity. They help the Accounting and Corporate Regulatory Authority (ACRA) determine whether the company is required to apply for any licenses to carry out their business.
Where can I find my SSIC code?
Step 1. Visit Singapore’s online portal through ACRA.
Step 2. Enter your company’s business activities in the search box.
Step 3. Find the result that matches your business best.
Step 4. If the description is too generic, you may elaborate more on your business activity type during the incorporation process.
4. Resident Director
A director has an important role in the company as he or she is responsible for managing the affairs of the company. The Companies Act stipulates that a company needs to have at least 1 director who is a resident in Singapore. A person is considered a resident if his or her usual place of residence is in Singapore. A Singapore Citizen, Singapore Permanent Resident, EntrePass holder or Employment Pass holder, and who has a local residential address are readily accepted as resident. Sprout Asia provides nominee director services if you are unable to identify a resident director for your company!
5. Work visas
A foreigner (non-Singapore Citizen and non-Singapore Permanent Resident) who wishes to work in Singapore will need to apply for an EntrePass or Employment Pass.
- Eligibility for EntrePass is set relatively high, EntrePass is intended for serial entrepreneurs, high-calibre innovators or experienced investors. Visit EntrePass Eligibility for details.
- You may also apply for an Employment Pass under the new company that you are incorporating. Employment Pass are reserved for managerial, executive or specialized job. A stipulated fixed salary is required, starting at S$5,000 and scales up depending on your level of experience. You will also be required to have acceptable qualifications such as a good university degree, professional qualifications or specialized skills.
If you are a foreigner already in Singapore on Employment Pass, Dependant’s Pass or other types of visas, you can be a shareholder of a new company, but you are only allowed to be a director after obtaining a Letter of Consent from the Ministry of Manpower. Talk to Sprout for assistance in applying for the appropriate paperwork!
6. Company Secretary requirement
It is mandatory for companies to appoint a Company Secretary. A Company Secretary must be a qualified person under the Companies Act whose role is to assist the directors in ensuring that the companies maintain accurate records and meets its regulatory obligations. A company who fails to meet its obligations may be taken to task by the regulators. The position of Company Secretary cannot be left vacant for more than 6 months at any point in time.
Sprout offers secretarial services bundled with incorporation as a one-stop solution and represents great value. We are able to deliver value at an attractive price point as we understand the focus of most owners are not on compliance, but on getting the business off the ground. Hence, we aim to be the trusted advisor for owners to get the house in order while leveraging on technology to provide greater value.
7. Financial Year End (FYE)
It is a requirement to inform ACRA of the Company's financial year end during registration of Company. The FYE is typically 12 months long, but you need to decide whether your accounting period covers 12 months or over 52 weeks.
When choosing an FYE, we recommend choosing the last day of the previous month if you don't have any particular preference (eg. If we are in the middle of May, we recommend 30 April). This will maximise your tax breaks as a start-up company.
A shareholder is the owner of shares in a company and is accorded rights to vote on company’s matters and to share into the profit of the company.
When selecting shareholders, it’s important to remember the role that they have in the company. On one hand, shares of the company designate company ownership. On the other hand, it also authorises rights, privileges and responsibilities. There are many things to note such as the different classes of shares and stages of capital shares.
9. Registered Address + Constitution
A registered office address refers to the place where all official letters to the company are sent, and the place where the company’s register and records are kept.
The address must be provided during your incorporation application and be accessible to the public during normal office hours but need not be where the company conducts its activities.
Technically, you may choose to use your home address if you meet certain criteria. However, this will come with the cost of your privacy as your business address is public information. You won't need to rent an office space because Sprout Asia's Launch and Offshore Incorporation packages can provide you with a registered address! Locals may also top-up and opt to enjoy this service.
You should also have a Company Constitution. This is a legal document that describes the key characteristics of the company and how its operations will be carried out, has the rules and regulations for its governance, and the rights and responsibilities of the directors, shareholders and company secretary. You may create your own Constitution or adopt the Model Constitution.
10. Corporate bank account
One of the natural tasks after incorporation is open a corporate bank account and immediately start operations! There are multiple factors to consider when you decide to select a bank to work with. You should consider minimum balance requirements, bank account maintenance charges and bank transfer charges that fits your business needs. You should also consider a potential integration with your accounting system and the ease of operating the bank account such as the nearest bank branch or familiarity with the internet banking portal.
When you open a new bank account, the bank will conduct Know Your Customer (KYC) procedures so choosing a bank whom you regularly bank with will be helpful. Foreigners who are looking to open a bank account in Singapore for the first time may be asked to show invoices, contracts or bank statements to prove genuine business needs in Singapore. Read on here for more information about opening a bank account for your company!