A Comprehensive Guide to Starting a Business in Singapore

If you intend to start a business in Singapore, this comprehensive guide from Raffles Corporate Services will be useful to you.

Benefits of setting up a business in Singapore

Singapore has very low tax rates when compared to other major economies around the world. It also has excellent infrastructure, world class banking services, well trained workforce and a very pro-business government. Moreover, Singapore generally does not limit foreign ownership of companies. This is beneficial for companies looking for funding as it opens up companies to obtaining investment from locals and foreigners alike.

When do you NOT need to register your business?

If you operate under your full name, i.e. you act as a sole proprietor in your own personal name, then you do not have to register your business.

An example of this would be property agents, insurance agents and taxi drivers. Another example of this would be a private tutor. If the private tutor provides tuition to his or her students and obtains payment under his or her own name, then there is no need to register his or her business. However, if the tutor operates under a brand, say “Happy Tutors”, then he or she will need to register the business with the Accounting and Corporate Regulatory Authority (ACRA).

Other exemptions where businesses do not need to register with ACRA include:
1) Institutions, authorities, persons or funds that are exempt and as identified by the Singapore government
2) Registered societies and/or cooperatives
3) Mutual benefit organisations
4) Trade unions

If you are unsure whether you need to register your business, you may contact the team at Raffles Corporate Services at [email protected].

Do note that a failure to register a business if there is a requirement to do so is an offence under the Business Names Registration Act.

Are there restrictions on foreigners starting businesses in Singapore?

Foreigners can fully own a Singapore-registered company. This means that there need not be a Singapore citizen or Singapore Permanent Resident as the shareholder of the Singapore company.

The management of a Singapore-registered company is left to the directors of the company. There must be at least one resident director in a Singapore-registered company. This resident needs to be ordinarily residing in Singapore. This means that this individual can be a foreigner but must have a valid work pass to be ordinarily residing in Singapore. For that matter, a Singapore citizen who is residing outside of Singapore cannot fulfil the role of this resident director.

Things to take note of BEFORE starting a business in Singapore

Running a business has its cost. There are costs to setting up a company or registering a business. On top of that, there are operational costs involved. A business needs to pay rent, hire staff and pay for regulatory and professional fees. The excuse that “my company is not making a lot of money” is not a valid excuse for not adhering to the statutory requirements.

A business owner needs to be familiar with the relevant laws (i.e., the rules and regulations of running a company or a business). If these rules and regulations are not adhered to, the company and its directors may be charged with certain statutory offences. If you as a business owner or a director of a company are not well versed with the rules and regulations of running a business or a company, you should engage professionals to aid you in this aspect. For example, if you are not familiar with keeping accounts, you should engage an accountant in-house or at least outsource your accounting needs to a company that does accounts.

In most cases, we advise our clients that a private limited company structure is the most ideal. However, in certain cases where there may only be one proprietor, then you may consider registering a sole proprietorship. A company structure is most attractive to most business owners because a company is a separate legal entity.

Taxes

A company will pay corporate taxes. Singapore has a flat corporate tax rate. However, because of tax incentives and tax rebates, the effective tax rate is usually very much lower. In most cases, corporate taxes are lower than personal income taxes.

A sole proprietor or partnership will pay personal income tax rates.

One of the major draws of registering a company is the attractive corporate tax rates.

What information is needed to register a business?

There are certain restrictions for certain words which cannot be in the business name. If you are registering a company, then there will usually be a prefix at the back of the name to state the type of company. For example, a sole proprietor will have the name “Happy Tutors” whereas a company will have the name “Happy Tutors Pte Ltd”.

The business or company will have to state the nature of the business it is engaging in on its profile. Therefore, there needs to be at least one primary activity. There can be a secondary activity as well. The secondary activity is not compulsory.

Every business or company needs to have a registered office. This cannot be a PO box. You can either rent a physical office or subscribe to a virtual office. There are home office schemes for certain trades as well. There are also fees to be paid to seek approval from HDB or URA. Do note that you have to register your home office with HDB or URA if you want to use your home as your home office.

This only applies to companies. This is the amount of capital that the shareholders have invested in the company. The minimum paid-up capital is SGD$1.

Other considerations

As a business or company owner/ director, you will need to consider these as well.

You may need certain licences to provide the goods and services that you intend to provide. For example, if your business is in providing health products, you may need a licence from the Health Sciences Authority (HSA). If you are doing collective investments, you will need a licence from the Monetary Authority of Singapore (MAS).

This is only required if certain criteria are met. You may also choose to voluntarily register GST.