Essentials To Starting Your Business
Singapore, while being small, has grown into a major economic powerhouse and serves as de facto financial hub for Southeast Asia. Over 400,000 businesses are located in Singapore, which is ranking second in the world for being the easiest place to conduct business. Thus, it comes as no surprise that foreigners seeking to start their own businesses would pick this dynamic metropolis as their base. Careful consideration of a number of crucial factors is necessary when deciding whether to relocate and start a business in a new country. Before you start a business, it is advisable to conduct thorough research on the rules and regulations of the country that may govern your new venture or expansion plans
Selecting the right type of business entity
Before starting a business, the first step is to thoroughly research the market to understand the business opportunities available to multinational corporations and foreign corporate bodies. Options should then be compared based on practicality, capital, expertise, and other factors.
The common types of business entities registered in Singapore are:
Sole Proprietorship Firm
Partnerships
Limited liability company
Limited liability offers protection to the owners and shareholders of limited liability partnerships and corporations. Private limited companies make up the majority of businesses in Singapore.
Registering your company
The Companies Act (Cap 50) governs all companies in Singapore, and all companies are required to register with the Accounting & Corporate Regulatory Authority (“ACRA”). A branch office, subsidiary company, or a representative office are the forms of entities that the foreign companies can consider to establish their presence in Singapore.
Branch office
A branch office is an extension of a foreign company that establishes a place of business in Singapore. It is not a legal entity. The head office is liable for the debts and liabilities of the branch office. Setting up a branch office helps to facilitate expansions of business operations in Singapore for the foreign head office.
Subsidiary company
A subsidiary company in Singapore is a private limited company that allows either a foreign or local company as its major or sole shareholder. 100% foreign ownership is permitted under the Companies Act (Cap 50), and the shareholders’ liability is capped at the value of the shares they subscribe for. This type of entity is the most preferred choice for foreign companies to establish a presence in Singapore. Unlike a branch office, the subsidiary company is a legal separate entity from the parent company.
Representative office
Before setting up a company in Singapore, a foreign company may evaluate the viability of its operations by setting up a representative office, which is a temporary establishment with restricted capabilities. It has no legal status and can only be used temporarily by businesses that are not ready to launch a full-fledged endeavour in the country. A representative office is not permitted to make commercial agreements, send out invoices or receipts, or provide clients with services, among other things.
Given the three preferred business structures, most foreign companies would choose to register their companies in Singapore as a subsidiary for the following reasons:
- As a separate legal entity, the parent company would be protected from the liabilities of the subsidiary.
- Shares of the subsidiary can be wholly owned by a foreign parent company.
- A subsidiary company is identified as a local Singapore company and hence can benefit from several government incentives, tax subsidies and other attractive schemes available.
Opening a bank account
The next step is to open a bank account after your company has been successfully incorporated under ACRA. You can choose from a variety of both reputable domestic and international banks, including HSBC, Standard Chartered, OCBC, and DBS, among others.
Some businesses including restaurants, childcare centres and financial services, etc. would need a specific license to operate. Once your company has been registered with ACRA, you are required to apply for the licenses that are issued by several Singapore government agencies.
Singapore has long been acknowledged as the perfect location for multinational corporations to establish their headquarters or expand their business ambitions. Singapore is the easiest place to do business because of its robust intellectual property rules, comprehensive tax policies, and attractive trade incentives.