Starting Guide for Singapore SMEs

Starting Guide for Singapore SMEs

Starting Guide for Singapore SMEs Cover

Over the last two decades, Singapore has transformed itself into a thriving hub of SMEs among the 10-member strong ASEAN countries. Despite being one of the smallest in the region in terms of size, Singapore punches way above its weight where SMEs are concerned. With its competitive edge in education, infrastructure, and environment, Singapore continues to attract investors from all over the world.

Global interest in setting up SMEs in Singapore is only getting more pronounced. And that is the purpose of this guide. Think of this guide as a nifty primer on setting up a small or medium-sized company in Singapore.

 

What is an SME?

SME stands for Small and Medium Enterprises. SPRING (Standards, Productivity, and Innovation Board) of Singapore defines SMEs as:

  • Companies with less than $100 million in annual turnover
  • Companies with less than 200 employees

The Singapore government’s more liberal approach towards the development of SMEs ensures that Singapore SMEs not only withstand but also thrive in fierce global competition. According to the Singapore Department of Statistic's SME Report, as updated in September 2022 :

  • There were little over 288,000 SMEs in Singapore.
  • SMEs made up 99% of all enterprises in the country.
  • The combined SME workforce employed 71% of the total workforce in Singapore.
  • As many as 20% of SMEs are foreign-owned entities.

 

The Role of Singapore SMEs

SMEs are not just a corner stone of Singapore's economy; they also play a pivotal role in residents' daily lives. SMEs contribute to nearly half of Singapore's GDP and employ about 3 out of every 10 people in the country. However, it's not just the economic gains for Singapore that make SMEs so important. SMEs also drive innovation and job creation in the country, two crucial elements of socially inclusive growth.

Let's break down the role of Singapore SMEs into five aspects:

  • SMEs are singularly responsible for the country's sustained economic development.
  • Singapore SMEs are the main drivers of its economy, both because they generate consistent employment for Singaporeans and because they provide an exceptional standard of living for Singapore people.
  • SMEs attract foreign investment continuously, which helps the country expand its foreign exchange reserves.
  • These companies provide high-quality goods and services at low prices to locals who live in a high-income economy.
  • SMEs contribute significantly to social progress through their innovation and the creation of new jobs. 

 

Types of Business Structures That Are Suitable for Singapore SMEs

Singapore SMEs support various business structures. The choice of business structure depends on the company's objectives, size, and industry. The following are the different types of business structures that Singapore SMEs can choose from:

Sole Proprietorship

An individual, a business, or a limited liability partnership can own and manage a sole proprietorship. The company doesn't have any partners.

A sole proprietorship has the following legal standing:

  • It is not a separate legal entity from the company's owner.
  • The business owner is liable indefinitely (i.e., the business owner is personally liable for all the debts and losses of the sole proprietorship)
  • It may bring a claim or defend one in the owner's name.

Limited Liability Partnership

A partnership is a company that has two or more partners. A person, business, or limited liability partnership can be the partner. A general partnership can have a maximum of 20 partners.

A partnership's has the following legal standing:

  • It is not a separate legal person from the company's owners.
  • The partners directly owe all partnership debts and losses.
  • It may file a lawsuit or be sued on behalf of the partners.

Private Limited Company

A Private Limited Company (PLC) is a company that can issue shares and is subject to the Capital Markets Act. The Private Limited Company Act of Singapore is the law that lays down how a PLC is set up. The company will have fewer than 50 shareholders, and all the shares will be privately held. Individuals who set up their companies as PLCs in Singapore typically are in the business of running small and medium companies.

A private limited company has the following legal standing:

  • Has a share capital
  • Can have a maximum of 50 shareholders
  • Corporations can be shareholders

   

What Qualifies as a Singapore SME

Singapore is home to a diverse SME ecosystem. This environment is ripe with opportunities for entrepreneurs, but it also presents unique challenges you don't find in other countries. Understanding Singapore's requirements and what qualifies as an SME in Singapore is crucial. There are three requirements for qualifying as a Singapore SME:

  • A minimum of 30% of the shares must have local ownership.
  • The annual turnover of an SME does not exceed $100 million.
  • The SME does not have more than 200 employees on its payroll.

Step-by-Step Guide to Start an SME in Singapore

Starting any SME in Singapore requires mandatory registration with the Accounting and Corporate Regulatory Authority (ACRA). Here is the breakdown of the SME registration process in Singapore:

1. Reserve your business name

  • Before registering your SME with ACRA, you have to ensure that it is available. A simple search of your selected business name will tell you whether it’s available.
  • If your proposed business name is available, you can proceed to BizFile+ to register for $15.
  • ACRA reserves your business name for 120 days once it's approved. Failure to register your business within this period will result in the expiration of the business name, and it will be available for any other company.

2. Register your residential address

At the time of registration, ACRA requires all company officers and business owners to provide their residential addresses. When consumers buy reports about a company, they gain access to contact details for that company. If you'd rather not make your residential address public, you can always use the “Alternate Address” option which will cost you $40.

3/a. Register your business address (for Sole-Proprietorships)

If your SME is a sole proprietorship or any other kind of partnership, you must register your business address—the address where you plan to carry out your business.

If your business meets the criteria of the Home Office Scheme, you can use your residential address instead of a commercial one. However, you will require prior approval from HDB or URA, whichever applies to you, should you go down this route.

3/b. Register your office address (for LLPs and PLCs)

The registered office is the official headquarters of an LLP or a company. It is the designated location for receiving and handling all official correspondence on behalf of the entity. While it is preferable for a company's or LLP's main place of business to be its registered office, this is not always necessary.

4. Submit your application to ACRA

Once you have all your information and have completed the previous steps successfully, the next step involves submitting your application. BizFile+ requires the expressed consent of all owners or authorized representatives to finish the approval process. You can also hire a registered filing agent or an incorporation service to apply for you if you prefer.

  • Registration fees for sole proprietorships and LLPs:
  • Name application fee – $15
  • Registration fee – $100
  • Registration fees for companies:
  • Name application fee—$15
  • Registration fee—$300

5. Receive your Unique Entity Number

After successful registration, your SME will receive a Unique Entity Number, or UEN, from the system. The UEN is a number assigned to every SME that interacts with a government agency. Every SME is required to have a UEN to be considered legitimate.

6. Get your licenses and approvals

You may need licenses or approvals from other government agencies before you can legally operate your business in Singapore. You can check whether you need any licenses or approvals for your business type at GoBusiness Licensing.

If you don't need any other permits or licenses to start operating, you can do so as soon as you receive your UEN.

SMEs Government Grant in Singapore

Singapore is one of the most SME-friendly countries in the Asia Pacific. The government of Singapore enacted favorable tax policies to encourage entrepreneurship and growth. In addition, its robust economic growth has resulted in a low unemployment rate and a high GDP per capita.

The Singapore government aims to create a conducive environment for all business enterprises by helping them succeed. SME grants are an excellent way for startups to get their businesses up and running. These grants lower the costs of starting a business, reduce the amount of capital needed, and make it easier to get loans.

The final section of this guide will walk you through the significant SME grants available in Singapore.

 

Enterprise Development Grant

 

The Enterprise Development Grant, or EDG, is the first SME Singapore grant you should consider if you require funding for your company that is in the food and retail service sectors to innovate, improve and eventually venture overseas. The grant supports businesses to evolve in these three core values:

  • Core Capabilities
  • Innovation and Productivity
  • Market Access

The available funding offered are up to 80% from 1 April 2022 till 31 March 2023 mainly targeting remuneration of third-party resources that are crucial for business growth.

Productivity Solutions Grant

 

Productivity Solutions Grant, or PSG, is what you will need if your objective is to adopt technology to increase the productivity of your SME. The PSG facilitates the implementation of IT solutions for SME process automation. Businesses use IT services in the food and beverage, transportation, construction, and retail sectors. Using PRG to fund IT solutions for a variety of business purposes, including:

 

  • Registered and operating in Singapore
  • You can either purchase, lease, or subscribe to IT solutions or equipment used in Singapore.
  • Have a minimum of 30%local shareholding, with Company's Group annual sales turnover less than S$100million, OR less than 200 employees (for selected solutions only)

 

Government agencies like the National Environment Agency and Enterprise Singapore offer pre-scoped and proven PSG solutions. The maximum support level will increase to 70% on April 1, 2022. The enhanced support level of up to 80%for qualifying pre-scoped solutions will be extended from April 1, 2022, to March 31, 2023, for the food services and retail sectors.

 

Market Readiness Assistance (MRA) Grant

Market Readiness Assistance, or MRA, is the grant that helps your Singapore SME go global or enter a new market. It can also help you grow your business by accelerating the establishment of a new subsidiary or branch in Singapore. Under the MRA grant, they are offering up to 70% of the following eligible costs capped at S$100,000 per company per new market till March 31, 2023:

  • Promotion for the foreign market (limited at S$20,000)
  • Development of foreign businesses (capped at S$50,000)
  • Setting up an overseas market (capped at S30,000)

Each application is only allowed to be involved in one activity in one foreign market (e.g., market-entry or participation in a trade fair)

 

Skills Future Enterprise Credit (SFEC)

Skills Future Enterprise Credit, or SFEC, is for SMEs who want to invest extensively in enterprise capability development and transformation. This grant entails a $10,000 credit for those who qualify. This sum covers 90% of the costs associated with running the program. However, there are three conditions that you have to satisfy to be eligible:

●       Haven’t applied for any other grants or funding

●       Contribution to the Skills Development Levy in the amount of at least S$750.

●       Have at least three Singapore permanent residents or Singaporean citizens working for your SME.

Wrapping Up

Singapore has a high degree of economic freedom and is one of the most robust economies in the world. The Singapore government understands just how important it is to encourage entrepreneurship, and they are constantly searching for ways to make it easier for new businesses to establish themselves.

This has led to a number of SMEs thriving in an SME-friendly environment, allowing them to compete on a global level with their international counterparts. Incorporating a new SME in Singapore can be challenging for entrepreneurs who are new to the business journey. But Sprout Asia turns it into a smooth and hassle-free process for you.

Head here to find out how.