BUSINESS ARTICLE

Setting up a company in Singapore: what you need to know

Setting up a company in Singapore - what you need to know

Setting up a company in Singapore: what you need to know

boardroomsuperadmin Business Insights, Corporate Secretarial

In the heart of Southeast Asia’s thriving markets, Singapore’s growing economy and political stability continue to attract multinational corporations and startups. Eager to build on the country’s reputation as an economic powerhouse, the Singapore Government’s policies and regulations have created a favourable environment for businesses to thrive in.

If you are a business owner or investor considering setting up a company in Singapore, you are not alone. Every month, thousands of businesses are registered in Singapore.

In this article, we explore the various benefits of establishing a business in Singapore, the different types of business structures and important considerations when embarking on the process of company registration.

Why choose Singapore for your company setup?

There are many reasons investors, entrepreneurs and company directors choose to form a company in Singapore. Here are some salient factors:

  • There is no minimum shareholder requirement.
  • There is no minimum requirement for paid-up capital when incorporating a private limited company.
  • There is no foreign exchange control.
  • Singapore is close to Asia’s thriving markets.
  • Singapore offers favourable tax incentives and low corporate tax rates.
  • Singapore’s workforce is highly educated and skilled.
  • Singapore is politically stable.

Singapore has a sound legal system and a mature financial infrastructure.

Benefits of setting up a company in Singapore

SEVEN BENEFITS OF SETTING UP A COMPANY IN SINGAPORE

There is no minimum shareholder requirement

Singapore maintains a relatively open investment environment and imposes no minimum shareholder requirement on businesses.

“Because there are no restrictions on foreign ownership, a foreign entity can own the Singapore subsidiary or fully own a Singaporean company, either as a corporate or individual investor,” says Eunice Hooi, Head of Corporate Secretarial, BoardRoom Singapore.

There is no minimum requirement for paid-up capital when incorporating a private limited company

Singapore has a robust free-market economy and generous investment policies. It also has no minimum paid-up capital requirement for incorporating a private limited company (PLC). Because of this, a PLC, one of the most common business types in Singapore, can be incorporated with just SGD 1.

There is no foreign exchange control

Generally, Singapore has no restrictions on foreign exchange transactions and capital movements. “From an investment perspective, this means that it is easy to remit or repatriate capital and/or profits in and out of Singapore,” says Eunice.

Singapore is close to Asia's thriving markets

Singapore’s location is also very attractive to investors. It is strategically located close to the massive economies of China and India.

With well-established infrastructure, including one of the busiest airports in the world and one of the largest ports in Asia, the country is well-placed to do business with other thriving economies.

Singapore offers favourable tax incentives and low corporate tax rates

Singapore has a range of tax incentives that are attractive to investors and boasts one of Asia’s lowest corporate tax rates of just 17%.

Singapore has also implemented the one-tier tax system, which means businesses pay corporate tax at the corporate level just once. Therefore, no additional taxes are imposed on the income, and shareholders are exempt from taxation on any dividends distributed by the company.

There is a highly skilled workforce in Singapore

Singapore boasts numerous corporate service providers, offering entrepreneurs a wide array of options when considering a company setup.

The country is also home to a highly educated and literate workforce. That is reassuring for foreign investors who are exploring company setups in Singapore and are looking for local talent to hire.

Singapore is politically stable

For business owners looking to establish a business in a country they have never operated in before, stability and security are paramount. Singapore is politically stable, and nations around the world recognise its business-friendly regulations, reliable policies, and high governance. This makes it an attractive and low-risk location for businesses.

Types of company registration in Singapore

There are several ways to structure a business in Singapore. These include:

Sole proprietorships
This structure consists of one business owner who is personally responsible for any of the business’s debts and losses, as the business owner is subject to unlimited liability.
Partnerships
A partnership consists of two to 20 owners, where owners take on unlimited liability, so they are personally responsible for any of the business’s debts and losses.
Private limited companies (PLC)
In this structure, the business is established with its own legal identity. As it is separate from shareholders and directors, their liability is limited to the sum of what they have funded as capital.

This gives entrepreneurs peace of mind when considering a company setup in Singapore. It also means they can raise capital relatively easily. They can do this by increasing the number of shareholders or by issuing more shares to current shareholders.
Limited liability partnerships (LLP)
This structure is similar to that of a PLC. While a privately limited company can have one to 50 shareholders, in a limited liability partnership, there must be a minimum of partners with up to 20 partners.

In a business with this type of structure, the partners will not be held personally liable for any business debts incurred by the LLP. However, an individual partner may be held personally liable for claims from losses resulting from their wrongful act or omission. In Singapore, this structure is often considered during company registration for those who prefer the benefits of limited liability while maintaining a partnership arrangement.
Variable capital companies (VCC)
A variable capital company is another type of corporate structure in Singapore. This structure allows a company to be established as a single, standalone fund for a single entity or as an umbrella fund for multiple funds.

This structure's flexibility makes it an attractive choice for company registration in Singapore. Investors can either incorporate a new VCC in Singapore or redomicile their existing offshore investment fund to Singapore as a VCC.

The structure also offers flexibility in how shares are issued and redeemed.
Choosing a company structure

How to choose the right company structure

Entrepreneurs and investors are advised to carefully consider business plans and decide whether the business will be a short-term or long-term venture when embarking on a company setup in Singapore. Those factors will affect the best kind of business structure they should set up in the establishment phase.

Kevin Cho, Director of Corporate Secretarial, BoardRoom Singapore, highlights the importance of considering the benefits specific to Singapore when choosing a business entity. “For example, Singapore offers tax benefits to startups established as private limited companies. These businesses are entitled to a new startup tax exemption for their first three consecutive tax years, i.e. a 75% exemption on the first SGD 100,000 of normal chargeable income* and a further 50% exemption on the next SGD 100,000 of normal chargeable income*.”

*Normal chargeable income refers to taxable income that is subject to tax at the prevailing Corporate Income Tax rate of 17%.

It can also be helpful to engage a professional corporate service provider, as the tax treatment of companies set up in Singapore varies depending on the type of business.

“PLCs are taxed as separate entities at the corporate tax rate of 17% on the business profits,” explains Eunice. “On the other hand, LLPs are given a tax-transparency treatment, meaning they are not taxed at the LLP level. So the owners or the partners will be taxed on their share of income from LLP based on the relevant tax rates that apply to corporate partner and individual partner.”

When choosing the right company structure, it’s also crucial to consider your future exit options. Eunice explains there are several ways to end a business. “It can be done through liquidation. Another way is through a simple process called striking off when the company has a clean balance sheet. A third option would be to sell the business through an asset divestment or a share divestment.”

For instance, sole proprietorships may have a simpler process for striking off, while corporations may benefit from asset divestment options. Selecting a structure that aligns with your long-term goals can lead to a smoother exit strategy, making these considerations essential during the establishment of your business.

Steps to setting up a company in Singapore

Business owners and investors exploring company registration in Singapore should engage with a professional corporate service provider who can guide them through the process of company setup. This includes ensuring the company name is available and suitable for registration, deciding on the entity structure, and ensuring compliance with local and regional regulatory requirements at all times.

When preparing for a company setup in Singapore, make sure you have all the necessary documents ready. These typically include the company’s constitution (formerly known as the Memorandum and Articles of Association), identification documents for directors and shareholders, a registered local address, and details of the company secretary. Proper documentation is key for a smooth registration process.

Once the business completes its company registration with the local authority, namely the Accounting and Corporate Regulatory Authority (ACRA), it may purchase its certificate of registration and business profile, which contains the necessary corporate information from ACRA. The business will also be assigned a unique entity number.

The timeline for completing a company registration in Singapore can vary depending on the completeness of the documentation and the complexity of the business structure. However, with all documents in order, the registration process with ACRA is typically quick and can be completed within one to three days.

The business also has to determine its share capital and be sure to abide by the rules governing shareholders and directors. For example, a minimum of one local resident director must be appointed. It is noteworthy that foreign individuals can serve as directors if they meet specific criteria. Additionally, the company should consider engaging a qualified company secretary.

After completing the initial company setup in Singapore, businesses must adhere to ongoing compliance requirements to maintain good standing. This includes filing annual returns with ACRA, maintaining proper accounting records, submitting tax returns, and ensuring the appointment of a qualified company secretary within six months of incorporation. Staying compliant helps businesses avoid penalties and build a trustworthy reputation in the market.

Steps to setting up a company in Singapore

The right advice for your move into Singapore

Singapore offers attractive incentives for foreign investment and is a politically stable, easily accessible, and talent-rich country in which to setup a company. If you’re considering a move to Singapore as a business owner, director, or investor, BoardRoom can help with all aspects of the business lifecycle.

BoardRoom offers a range of services, including corporate secretarial, accounting, tax, and payroll services.

To help establish your business in Singapore, please contact us today.

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