A. BUSINESS MODELS:-
Singapore always tops the charts among other jurisdictions when it comes to international surveys assessing business metrics. Its scores are perfect in terms of indicators such as political stability, economic competitiveness, efficacy of business ecosystem, transparency of regulations and other parameters that are crucial for establishing and growing a business entity. Singapore offers the following types of legal structures for forming a business:-
- Sole Proprietorship– A sole-proprietorship is a business owned by one person or one company. There are no partners. The sole-proprietor has absolute say in the running of the business. A sole proprietor is solely and legally responsible for all the contracts relating to the business, owns its assets and is personally liable for all its debts. Therefore, the sole proprietor has unlimited liability and can be sued in his or her name, or the business name. Further, a sole proprietorship is not considered as a separate legal entity.
In Singapore, if a person is engaged in any activity that is carried out on a continual basis for the purpose of gain, such a business must be registered (such as sole proprietorship, private limited company, or limited liability partnership). Any natural person who is of age 18 years or above can register a sole proprietorship. A Singapore registered company is also eligible to register a sole proprietorship. Sole proprietorship must appoint at least one manager who is a natural person of at least 21 years of age and who is ordinarily resident in Singapore – a Singapore Citizen or a Permanent Resident. A local Singapore physical address must be registered. Resident individuals in Singapore can use their residential address as registered office address after getting approval from the relevant authority (Housing and Development Board in the case of public flats and Urban Redevelopment Authority in the case of private residences). Section 11(1) of the Business Names Registration Act 2014 provides that if a foreigner desires to register a sole-proprietorship in Singapore, then he is required to appoint a locally resident authorized representative whilst he continues to reside outside Singapore. Such an authorized representative must be a natural person; at least 18 years of age; otherwise of full legal capacity; and ordinarily resident in Singapore.
In order to register a sole proprietorship business in Singapore, the following documents/information(s) are required:
- Proposed business name;
- Description of principal activities;
- Local business address for the proposed business;
- Copy of Singapore ID for the owner;
- Local residential address of sole-proprietor; and
- Declaration of compliance and Statement of Non Disqualification.
Registration procedure involves a) reserving the name; and b) registration of the business. The registration procedure is computerized (Required to file an application online via BizFile-Accounting and Corporate Regulatory Authority, Singapore/ACRA’s electronic filing and information retrieval system). Once the registration process in complete and if everything is in order, the registrar sends an email notification confirming the successful registration along with the registration number. Singapore government does not issue a hardcopy registration certificate anymore by default as the softcopy is valid and acceptable in Singapore. After the email notification of successful registration is received, the registrant can retrieve a business profile for his new Singapore sole proprietorship that contains important registration information, which can be used to open business bank account, sign office lease, obtain a business phone line, etc.
- Partnership– A partnership is a legal relationship between two or more persons who carry on a business with the objective of making profit and sharing it between them. As a partnership is not an entity in law, it cannot sue or be sued in its own name and it cannot own property. Singapore allows three types of partnerships:-
- General Partnership– which is like a sole proprietorship, partners are personally liable for the debts and liabilities of the business and each partner can be held responsible for the actions of another partner.A general partnership can have between two and twenty partners. As with a sole proprietorship, each partner in a general partnership is personally liable for all the debts and liabilities of the business. If the number of partners exceeds 20 it must be registered as a company. Individuals and companies may set up a partnership. It does not constitute a separate legal entity. It can sue or be sued in the firm’s name but it cannot own property in its own name. The partners divide the profits and the profits are treated as personal incomes of the partners for tax purposes and are taxed at personal tax rates.
- Limited Partnership-consists of general partners and limited partners, at least one of each kind. There is no limit to the number of partners. The liability of a limited partner is limited to the amount of his contributions and not personally liable. Unlike the limited partners, the general partners are personally liable for the debts and liabilities of the business. The limited partner cannot take active management roles in the business.
- Limited Liability Partnership (LLP)– liability of each partner is limited to the extent of his or her contribution. At least two partners are required but there is no upper limit on the number of partners. LLP has a legal identity of its own for it can be sued and sue in its own name. It can own property. Though the partners are not personally liable for the debts and losses of the LLP, the partners become personally liable in case of debts and losses arising from their own actions.
For the registration of the Partnership, first, an application for approval and reservation of Partnership name has to be filed with the Registrar. Thereafter, on approval, a partnership is required to be registered online via BizFile+ with ACRA. For the registration of the partnership, following documents are required:-
- Proposed name of the Partnership;
- Particulars of the partners/managers (foreign passport or Singapore ID);
- Residential address of the partners/managers;
- Consent to Act as Manager and Statement of Non Disqualification to Act as Manager;
- If partner is a company: Registration details of the company;
- Details of the registered address for the Partnership;and
- Declaration of compliance.
The registration process consists of two steps: a) name reservation; and b) registration of the entity. ACRA will send an email notification confirming the registration. A business profile containing the registration details can be obtained from ACRA upon successful registration. Both of these documents are provided in a softcopy format via email which is sufficient to all purposes in Singapore.
- Company– There are two types of companies, Private Company and Public Company. A private company is owned by several shareholders and is not open for public to apply for its shares. There is also a restriction on the transfer of shares of a private company. However, shares of a public company are openly available for subscription.
A limited liability company is the most commonly used business structure in Singapore. Under Singapore Companies Act, a limited liability company may be incorporated as a:-
- Private Company Limited by Shares– or often referred to as a Private Limited Company. A private limited company cannot have more than 50 shareholders.
- Public Company Limited by Shares– offers its shares to the general public and has at least 50 shareholders.
- Public Company Limited by Guarantee-is only for non-profit organizations engaged in work for the national or public interest, such as charity or art.
The first step in incorporating a company to obtain approval for the proposed name. Names for all companies in Singapore must conform to certain guidelines laid down in the Companies Act. After the company name has been approved, the following incorporation documents must be prepared and filed:-
- Memorandum & Articles of Association setting out the objects and bye-laws of the proposed company;
- Statutory Declaration of Compliance (Form 6);
- Certificate of Identity (Form 7);
- Notice of Situation of Registered Office and of Office Hours at time of Incorporation (Form 44); and
- Consent to Act as Director and Statement of Non Disqualification to Act as Director (Form 45).
All applications for the registration of a new company must be submitted online via BizFile+, ACRA’s electronic filing and information retrieval system. The company may commence business once it is registered with ACRA, subject to the condition that the company does not require any licences/approvals from other government agencies in order to carry out the business activities.
- Foreign Company Operations in Singapore– Foreign companies wishing to setup their presence in Singapore, usually chose from one of the following options:-
a) Subsidiary Company– is a Private Limited Company incorporated in Singapore with substantial shareholding held by a local or foreign company. It has a distinct entity than it’s parent company.A foreigner, who wants to set up his own company in Singapore, is required to appoint a locally resident director. The foreigner can continue to reside outside Singapore. Foreigners who wish to incorporate a company and be present in Singapore to manage its operations are strongly advised to seek approval from the Ministry of Manpower (MOM) before registration.
b) Branch Office– is registered in Singapore and is considered as an extension of its parent company and not as a separate legal business entity. Its liability extends to its parent company.Under the Companies Act, the minimum number of authorized representatives required is one. The branch of a foreign company must have at least one authorized representative who is ordinarily resident in Singapore.
c) Representative Office– is a short term set up (upto 3 years) for conducting marketing research activities, build brand value, understand local market and work with local agents. It is not allowed to enter into any commercial activities or any activities which generate revenue.
B. ENTREPRENEURSHIP IN SINGAPORE–
Startups in Singapore may run their business through different modes, such as Sole Proprietorships (foreigners have to appoint an authorized representative who is ordinarily resident in Singapore whilst they reside outside of Singapore in case the foreigner wish to reside in Singapore EntrePass is required), Partnerships (foreigners can apply for partnerships in Singapore if one of the partners is ordinarily resident in Singapore. In case all the partners are foreigners, an authorized representative must be appointed who is ordinarily resident in Singapore) or Companies. Most startups in Singapore prefer operating through a Private Limited Company, given that it is a separate legal entity and gives limited liability. Amongst other criteria required to incorporating a company in Singapore, the company must have at least one (1) local director ordinarily resident in Singapore and one (1) shareholder in order to incorporate and the company must be aware of the Accounting and Corporate Regulatory Authority (ACRA) filing requirements. Further, any foreign person who desires to pursue business prospects in Singapore is required to obtain a work pass called the EntrePass for foreign business people to start a business in Singapore and to optimize the usage of business opportunities available in Singapore. The Ministry of Manpower (MOM) and the Standards, Productivity and Innovation Board Singapore will process the application for the EntrePass and approved EntrePass applicants will enjoy the working pass for up to one year.