Singapore has become a popular place for entrepreneurs and business owners to start their new business ventures aka company incorporation. A little red dot on the map with very few natural resources to depend on, Singapore’s economic success is largely attributed to its extensive trade networks and good government initiatives that make it extremely appealing for entrepreneurs and/ or business owners to start company incorporation in Singapore.
Apart from these, there are a number of reasons which makes Singapore the undisputed champion. They are low corporate tax rates, availability of skilled manpower, good government ruling, high productivity and enforcement of intellectual property rights etc. They make Singapore the most conducive business environment for company incorporation when organisations are looking to expand into the region.
Singapore has been ranked by the World Bank for being one of the top 3 countries for ease of doing business and among the top 5 countries for starting a business, in a survey of 190 countries. The World Bank’s annual survey ranks according to the administrative burden of the tax system, ease of obtaining utilities and the number of processes to be completed before company incorporation.
Requirements For Company Incorporation In Singapore
Before starting company incorporation in Singapore, the business owners need to decide on several things and ensure that the necessary documents are prepared and ready prior to company incorporation. They are mainly:
- Company Name
- Company’s Principal Activities (the selection is up to a maximum of two)
- Particulars Of Company Directors
- Particulars Of Company Shareholders
- Registered Office Address
- Particulars Of Company Secretary
- Share Capital
- Constitution Documents
Pre-Incorporation Criteria For ACRA Registration
If you want to apply to the Accounting and Corporate Regulatory Authority (ACRA), the following documents need to be prepared:
- At least one shareholder
- Minimal paid up capital of S$1
- At least one company secretary
- At least one local director
- A local registered office address
Choosing The Company Name
There are several guidelines that business owners should take note of when selecting a name for their company such as:
- Making sure there are no words that can be construed as vulgar or inappropriate
- Using national symbols like “National Orchid” or “Merlion”
In addition, certain industries that are overseen by governing bodies due to the nature of their business, such as provision of real estate services, may require approval from the governing authority before they can proceed with reservation of the company name. Eg. Real estate might require approval from Council for Estate Agencies.
Approval is granted at the discretion of ACRA and the relevant government authority. For the avoidance of doubt, business owners should check with the relevant government authority for smoother company incorporation.
It is important to decide on the principal activities for companies incorporated in Singapore. The company’s principal activities can be selected from the list set out in the Singapore Standard Industrial Classification (SSIC). It is commonly known as the SSIC code. Similarly, if the company chooses certain business activities that are regulated, the company’s name application may be forwarded to the relevant government authority for its consideration.
Choosing The Right Business Structure
It is important to decide the type of business structure for the company before company incorporation as this will affect future business plans, operations and expansion etc.
1. Private Company Limited By Shares
Commonly referred to as a “private limited company”, it has between 1 to 50 shareholders, who can be private individuals or corporations. As of February 2021, approximately 70% of companies in Singapore operate as private limited companies. Many new company incorporations are private limited companies due to a number of reasons.
It separates legal entity with limited liability from its shareholders and directors, income is distributed as dividends once taxed at the corporate level, additional capital can be raised by issuing additional shares or bringing in new shareholders without changing the business structure, ownership can be transferred easily through the sale of shares even if a shareholder resigns or dies so the business can still operate seamlessly.
2. Public Company Limited By Shares
Containing more than 50 shareholders, it is suitable for large and well established businesses who want to raise capital by offering shares of the company to the public. The word, “Limited” must be included as part of the company name and the company needs to register a prospectus with the Monetary Authority of Singapore and with the Accounting and Corporate Regulatory Authority (ACRA).
They have extensive compliance requirements such as annual auditing of company accounts which must be filed with ACRA, filing annual tax returns with both ACRA and The Inland Revenue Authority of Singapore (IRAS) within one month of the company’s annual general meeting (AGM). Hence the registration fee is higher at S$300 and company name approval is an additional cost of S$15.
3. Limited Partnership (LP)
This structure must have at least one general partner and one limited partner at all times. There is no limit on the number of partners but the liability of general partners is unlimited.General partners are actively involved in the daily operations of the business and should a claim arise, their personal assets can be attached. The general partner can be an individual or company.
The limited partner’s liability is limited to his/ her amount of contribution to the company and more of a sleeping partner, who does not participate in the daily operations of the business at all. A limited partner can be an individual, company or foreign registered company. LP is registered with ACRA under the Limited Partnership Act.
4. Limited Liability Partnership (LLP)
A separate legal entity is created with this business structure. it requires fewer compliance activities than a private limited company. Each partner is taxed off their individual income so there is no need to file annual returns. If one of the partners is a company, it will be subject to corporate tax but the LLP is not eligible for corporate tax exemptions.
This business structure is suitable for professionals such as lawyers and architects who want to build a joint practice. A general rule of thumb is to state the specific management responsibilities and profit structure in the partnership agreement. Both individuals and companies can become partners. This is an alternative to sole proprietorship.
5. Sole Proprietorship
As its name suggests, the business is owned by one person and the owner is called a sole proprietor. He/ She will have total control and say in the business, including the management and day to day running of the business. Being a one man show, management is easier and all the profits go directly to the owner. The easiest to incorporate and the least expensive of all business structures, it also has less compliance requirements and there is no need to perform annual reporting.
The only main disadvantage is that in a sole proprietorship, the business and its owner are considered a single legal entity, meaning that the business owner is liable for all the business liabilities and for any legal action taken against the business. Personal assets might be at risk and the possibility of becoming bankrupt is higher if the business owner is being sued personally.
Registered Office Address
The company’s registered office should fulfil the following criteria:
- Open for at least 5 hours during ordinary business hours on each business day
- The address must be a physical office located in Singapore
- It cannot be a P.O. Box
There are several options available when it comes to establishing a registered office address in Singapore and they are renting an office space, choosing a virtual office or applying for a license to have a home office.
If the company incorporation is not urgent, renting an office space or applying for a license to have a home office can be considered. However, applying for a license can be a lengthy process and might be rejected by the Housing Development Board (HDB) or Urban Redevelopment Authority (URA) as residential areas might not be deemed suitable for business operations. A virtual office is the fastest to set up because it can happen in a matter of minutes.
Cost wise, a home office would be the best option as it is the cheapest because rent is not needed but if smooth administration is required, a virtual office will be the most suitable choice as virtual offices often provide complementary business services such as mail scanning and receptionist services or even provide professional corporate meeting rooms with the full range of facilities like video conferencing.
Under the Companies Act in Singapore, all companies are required to appoint a company secretary within 6 months from the date of incorporation. The company secretary must be a resident of Singapore, be 18 years old and above as well as have sound knowledge of the Companies Act.
The company secretary is considered as an officer of the company and assists in the administration of a company, making sure that the directors and shareholders are kept well informed of statutory obligations such as annual filing of audited documents and the holding of annual general meetings (AGM). If the company only has one director, he/ she cannot act as the company secretary.
These refer to the company’s memorandum and articles of association (M&AA) which will govern how the company is run. Business owners need to be very careful before signing and approving the M&AA as it might result in unwanted complications at a later date.
Other types of constitution documents that are unique to a business might include a shareholders’ agreement or an employee’s share option scheme. In general, business owners should consult a lawyer to get a professional opinion before deciding to sign legal documents.
For the company to submit the incorporation application to ACRA, a Singpass is required and that is an electronic identification provided to all Singapore citizens while foreigners with qualifying Foreign Identification Number (FIN) can also apply for a Singpass. With the Singpass, the incorporation application can be submitted online to ACRA via Bizfile.
In conclusion, there are a number of administrative steps involved during the incorporation application and it would be advisable for companies to seek a professional corporate provider’s help when it comes to company incorporation. An experienced provider will be able to highlight areas of concern which might delay the incorporation application and assist in liaison with the relevant government authorities when required.