How to Incorporate Your Business in Singapore
Starting a business can be a daunting task. Every decision entrepreneurs make has the potential to truly impact the future of their company. Registering your company is the first important step in growing a successful business. Therefore, it is important to understand the process and choices associated with registering your business.
To start off, the cost of setting up your business will differ based upon your citizenship and the business structure you choose. If you are a Singaporean citizen or a Permanent Resident, you must be at least 18 years old to set up a business. There are no additional requirements in terms of getting a work permit.
If you are a foreigner, you will need an Entrepreneurship Pass (or EntrePass) to set up your business. However, if you choose to operate from overseas, you must appoint a local nominee and apply for an Employment Pass for yourself. Service providers in Singapore charge an average of S$4,500 per application for the EntrePass and about S$850 for application for the Employment Pass.
Choosing a Business Structure
Singapore offers 5 distinct business structures: sole proprietorship, partnership, limited partnership, limited liability partnership and company. We recommend that you strongly deliberate on your choice of business structure since it can have a massive impact on registration costs, taxation, risk and liabilities.
The cost of registering your business generally ranges from S$115 to S$135 depending on the company's business structure. Most types only require an ACRA registration fee, though a "Company" structure would require extra S$700 to S$2,000 for company secretarial services.
|Business Type||ACRA Registration Expense|
|Sole-Proprietorship||S$115 (S$15 name application fee & S$100 registration fee) for 1-year registration / S$175 (S$15 name application fee & S$160 registration fee) for 3-year registration|
|Limited Liability Partnership||S$115 (S$15 name application fee & S$100 registration fee) for 1-year registration|
|Company||S$315 (S$15 name application fee & S$300 incorporation fee)|
New businesses are required to appoint a company secretary within 6 months of incorporation. This typically costs about S$700 to S$2,000 and includes the ACRA incorporation fee and about 1 year of company secretarial services. These services commonly include other benefits such as company memorandum, articles of associations, share certificates, e-notice incorporation from ACRA, minutes from first board meeting and assistance to open a corporate bank account. We encourage businesses to carefully review each secretary's benefits in order to choose a package that makes the most sense for their particular business. Below is a list of quotates obtained from a few secretarial firms in Singapore.
|Secretary Company||Company Incorporation Package (Locals)|
|Singapore Accounting||From S$850|
|Paul Hype Page and Co.||From S$600|
|3E Accounting||From S$428|
For foreigners, the total costs can vary based upon their desire to operate the company from overseas or relocate to Singapore. For example, if you choose to operate from overseas you must appoint a local nominee director. On the other hand, if you choose to relocate, then you must apply for the EntrePass. With that said, the cost of registration remains the same for foreigners and locals.
|Secretary Company||Foreign Entrepreneurs Operating from Overseas||Foreign Entrepreneurs Relocating to Singapore|
|Paul Hype Page and Co.||S$5,755 (with Nominee Director for 12 months, from S$3,800)||S$3,155 (with employment pass application and Nominee Director for 2 months)|
|SBS Consulting||S$2,980 (with Nominee Director for 12 months, from S$1,500)||S$2,730 (with employment pass application and Nominee Director for 2 months)|
The amount of tax you pay directly depends upon your business structure. Companies are taxed as corporations via the corporate tax while all the other business structures are taxed as individuals per the personal income tax rules. This means that businesses with partnership structures would tax each partner on his individual income.
The benefit of having a company in Singapore is that corporate tax rates are often lower than the personal income tax rates. For example – for chargeable income over S$320,000, the corporate income tax is 17% while the personal income tax is 18% for the first S$320,000 and 20% for any income over this amount.For more information about personal income tax rates, please refer to Inland Revenue Authority of Singapore's (IRAS) website.
Additionally, companies are eligible for significant tax deductions in terms of tax exemptions and rebates provided by the government. For example, all companies may benefit from a 40% tax rebate capped at S$15,000 in 2018. Singapore also remains attractive by helping companies avoid double taxation. For more information, refer to IRAS's website. The government also offers support to sole-proprietors and partnerships through a few deductions. Finally, make sure that you review grants available to SMEs in Singapore.
Risk & Liability
There are also varying levels of liability associated with each business structure. For example, if your business is a sole proprietorship, your own personal assets are at risk in the event of a liability case, such as a lawsuit or bankruptcy. Registering your business as a company or limited liability partnership will help you isolate this risk strictly to assets owned by the company. Therefore, in the event of a liability case, only the assets belonging to the business will be at risk. Likewise, partnerships and limited partnerships also offer a similar insulation from risky situations. However, while individual partners are not responsible for business liabilities occurring from the action of other partners, they are still personally responsible for business liabilities occurring from their own actions.
Business Structure Summary Table
|Sole-Proprietorship||Partnership||Limited Partnership||Limited Liability Partnership||Company|
|Ownership||1 person||2-20 partners||at least 2 partners||at least 2 partners||Exempt Private - 20 or less, Private Company – 50 members or less, Public Company – can have more than 50 members|
|Legal Position||Not a separate legal entity, can sue or be sued in Individual's or business's name||Not a separate legal entity, can sue or be sued in firm's name||Not a separate legal entity, can sue or be sued in firm's name||A separate legal entity from its partners, can sue or be sued in LLP's name only||A separate legal entity from its partners, can sue or be sued in Company's name only|
|Debt Liability||Owner personally liable for debts. Must pay out his personal assets.||Partnership personally liable for partnership's debts and losses incurred by partners.||General partner personally liable for debts and losses of the LP. Limited partner not personally liable for the debt and obligations of LP beyond amount of his agreed contribution.||Partners personally liable for debts and losses resulting from their own wrongful actions. Partners not personally liable for debts and losses of LLP incurred by other partners.||Members not personally liable for debts and losses of the company|
|Additional Requirements||Must renew business registration every 1-year or every 3-years||One-time registration only. Only an annual declaration of solvency or insolvency must be lodged.||Must appoint company secretary within 6 months of incorporation. Must appoint auditor within 3 months after incorporation unless company is exempt from audit requirement. Annual returns must be filed.|
|Taxes||Profits taxed at owner’s personal income tax rates||Profits taxed at partners’ personal income tax rates||Profits taxed at partners' personal income tax rates (if individual)/ corporate tax rate (if corporation)||Profits taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation)||Profits taxed at corporate tax rates|
The requirements and procedure to start a business in Singapore are fairly straightforward. Your application to incorporate takes place needs to take place with the Accounting and Corporate Regulatory Authority (ACRA) via their online terminal BizFile+. To register, you must be above 18 years of age and must use your allocated SingPass ID. In order to be eligible to register, you must be a Singaporean, Permanent Resident or Passholder during your application.