Singapore is one of the most prominent business hubs in the Asian region, attracting a great number of investors and entrepreneurs from foreign countries, as well as domestic businessmen. Quite often, newly-minted investors and businessmen arrive in Singapore with a variety of requests intended to open a legal entity right now. But in Singapore, and probably in any other jurisdiction, opening an official company within a framework of the law and business ethic is not as prompt as some people suppose. Of course, sometimes there are enough several days to complete all the steps of company registration. However, the everyday pace of business activity might insinuate unnecessary mistakes, causes for potential future corporate problems, with ethic issues among them, hence the article calls for circumspection in respect to knowledge acquisition and proper actions.
Importance of Company Incorporation
Business registration and company establishment are good at setting the footprint. The name that includes a few IRs gets highlighted because the jeopardizing is the most about the names when a new company or startup is established. For companies that are not sharing codes about cryptocurrencies, then for individual job searchings, the situation is the same. The names always should be inspected in the Singaporean company registration database, commercially. Because the Company Registrar only inspects an applicant’s company name before he submits his application digitally, in a microsecond. It never does room for the shared initials by same sounding names.
One thing that is common to all successful companies is that they have to be good at what they do. But it’s not enough! They must also let people know about their existence. There are lots of ways to do this for companies and startups. It’s almost impossible to summarize them, but in this article, the stages of incorporating a PTE (LTD) company in Singapore are going to be shared using company name registration as ‘the’ innovation. Here, the paperwork and procedures are not recommended, but the steps and general thoughts. The definitions and lists here are almost the same as in almost all official and unofficial designations, glossaries, and dictionaries. But one more time, they are connected and explained in detail.
Benefits of Company Incorporation in Singapore
Incorporation protects the personal assets of the owners, shareholders, and managers from business liabilities. Potential risks that can arise include lawsuits, bankruptcy, and other claims, which can lead to the loss of personal finances, real estate, and assets. Entering a business as a private limited company by shares or sending a private company limits the personal assumption of risks and liabilities to the contributed share capital or the providing offer. If the company expects to buy resources and get extra funds, it can give shares without considering dilution of the owners’ rights or mortgage assets, depending on existing laws and statutory limitations. Setting up your business as a corporation enhances the attraction for potential driveways or acquisitions.
Registering a business in Singapore is not for the faint of heart, but the rewards are worth the journey. These added advantages will immensely benefit your company. By incorporating a business, it acquires an identity distinct from its owners, directors, and members. As a separate legal entity, it can buy assets, have bank accounts, participate in contracts, sue, be sued, and carry out activities on its own right from that of its owners. This is a big contrast from a sole proprietorship and partnerships, where business owners and partnerships need to hold the property and engagements under their name. A business at home also does not appreciate the features of limited obligation, as the owners are personally liable for the liabilities.
Key Steps in Company Incorporation
To understand the key steps in Company Incorporation in Singapore, let’s study each of them in detail: These must be done in this order. Before the company is set up, the name must be reserved so that other steps can proceed. The first essential step in setting up a company in Singapore is to register a unique and meaningful name for its legal entity. The name must not impinge on existing trademarks, be the same as that of the entity’s website domain name, or have been used by any recruitment company in Singapore. Once an applicant is sure of the name, he can apply for it on the ACRA website. This applicant is provided a maximum of 120 days to carry forward or reserve the name, after which the latter option expires.
Here is a road map to make the process of an expat quitting their job, branding their company, incorporating it, and securing an Employment Pass as smooth and painless as possible. There are several steps when forming a company in Singapore. The first decision is to pick a company name. The name must be unique and not already reserved by another company. It also can’t be intellectual property or have any trademarks. It also can’t be vulgar or offensive in nature. The next steps are to complete and submit the application for company incorporation, obtain the resolution to conduct business, and structure the constitution of the company. Then, it’s important to resolve and nominate the first director of the company, resolve and nominate the first (or subsequent) company secretary of the company, and its registered address.
Choosing a Business Structure
The Decision-Making Process – Essentially, you have four key business structures that you are allowed to choose from in Singapore: 1) Sole Proprietorship, 2) Partnership, 3) Limited Liability Partnership (LLP) or 4) Private Limited (Pte. Ltd.) Company. To make a well-informed decision, one must first answer two fundamental questions – What essential features of my business do I want my chosen structure to support and what are the appropriate consequences that must follow this choice given my personal capacity? While more details about these structures are presented subsequently, without breaching the proprietary rights of company incorporation consultancy firms, the majority of start-ups in Singapore opt for the fastest, safest, cheapest, most tax-efficient, and simple to administer structure – the private limited structure.
Regardless of whether one is a seasoned practitioner or a business owner who has operated a single shareholder company for the past decade, the fact remains, every individual must make the very critical (and possibly life-changing) decision of “What kind of business structure should I use to incorporate my new company?” The significance of this decision usually hits people hard only in the months following business incorporation. By then, for many entrepreneurs, it may be too late to realize that their hasty decision to incorporate a private limited company without the guidance of proper due diligence has significantly handicapped “the potential” of their newfound enterprise, and in some extreme cases “the potential of their family’s future”. Therefore, as with many other important aspects of life, making a well-informed decision to start a company in Singapore begins with the acquisition of information.
Registering the Company Name
While choosing a company name in Singapore, ACRA advises that it has to be one that is not identical to a trademark or another business name. Besides, it cannot be obscene nor akin to any existing or limited company. Furthermore, a good name must not impinge on any copyrights or trademarks of products and it requires to be officially approved with the ACRA before the entire process of company incorporation can be completed. There are specific words like Legal, company, cooperative, bank, insurance which also require the relevant permission from the governing authority. Apart from these words, the name of company also cannot be similar to that of any established names in the same industry.
One of the first steps in company incorporation Singapore is naming your proposed company. For company registration, ACRA requires that the name of the company must be approved before the application can be filed. ACRA has a clear set of rules with respect to the name of the company and the guidelines as laid down by ACRA must be followed with any breach being liable to penalty. ACRA thoroughly scrutinizes every application for company registration and will promptly reject any proposed name that is found to breach guidelines. There are certain regulations governing company names in Singapore.
Appointing Directors and Shareholders
It is important to note that strict obligations are imposed on a director under the Companies Act and directors are fiduciaries. If a director is found guilty of breaching the duties imposed on him, he may be held personally liable and may also be disqualified from managing companies for a period of time. Hence, it is critical that the person appointed as a director has the competency and integrity required of the position. Apart from the points mentioned above, note that the director can also be the company secretary. The company secretary must be a natural person who has his principal or only place of residence in Singapore. The company secretary need not be professionally qualified, but he must have the knowledge and experience to discharge his roles and responsibilities as prescribed under the Companies Act, and it is up to the directors themselves to ensure that the company secretary possesses the requisite knowledge and qualifications.
In any case, a company must have at least one director who ordinarily resides in Singapore. A director is responsible for managing the company’s affairs, whereas the shareholders effectively own the company but do not actively participate in its management. The same person may act as both the director and shareholder. However, it is a common practice in Singapore to have a minimum of two directors who are not related, and at least one of whom is a resident of Singapore. The directors’ particulars must be recorded with the Accounting and Corporate Regulatory Authority (“ACRA”), and the appointment of the first director must be made within 6 months from the date of incorporation.
Obtaining Necessary Licenses and Permits
The minimum must-have license that all businesses should possess is the “Business License,” which any businesses carrying out activities or providing business in any form in Singapore have to apply for before their actual operation starts. If your business falls within a specific regulated industry/activity, you may require additional permits or licenses from relevant controlling authorities. Some regular businesses are likely to require one or more licenses/ permits to commence their operation. Examples of typical regulated industries in Singapore are Employment Agencies, Food Services, Liquor Services, Travel Agencies, Education industries, etc.
Once your business is incorporated, you may need to obtain necessary licenses and permits if your business activity requires it. It is important to know the list of licenses/ permits required and the application process to ensure a smooth transition and business continuity. This is especially important as failure to obtain the necessary licenses and permits may result in dire consequences such as penalties or compulsory winding up orders, which may kill the business before it even starts.
Opening a Corporate Bank Account
Once the firm is established, you will want to open a local corporate bank account when setting up a subsidiary in another country or business. Opening an account prior to, and much easier after, organization, will give you the ability to finance your company, making it simpler to impart and operate income tax. This initial section can start your company’s whole journey. The good news is that Singapore has an open green programme for any owner of a foreign firm or a free posting for a visa proposal, and processes related to the company in Singapore are extremely good, even after incorporation. But you can open a corporate account after the firm has already been developed once your Singaporean firm has been included. Since all financial habits have to be followed with the Anti-Money Laundering Protocol of the Rules for the Financial Movement Study (FATF), now there are financial companies who have opened their accounts without for this sort of activity the business exists yet.
After the approval of company incorporation documents in Singapore, the next step in the company creation process is to open a corporate bank account. Even though the bank account can be opened at any time after the company is incorporated, it is better to have the bank account open as soon as possible to avoid potential delays in capitalizing the business and to provide the company with a platform for managing its finances. Banks such as DBS, founded in Singapore, have corporate bank accounts designed for small to midsize companies that can be opened with a relatively low initial deposit. Other banks may be more difficult to deal with both from an organizational and account management perspective, but can still be very beneficial if they offer certain services, such as private banking, business consulting, or commercial loans. In this post, we will take a closer look at what you need to open a corporate bank account with DBS. Hopefully, this will give you an understanding of the process, the documentation and information needed to open the account, potential costs, and how long funds should become available.
Compliance Requirements
Singapore tax resident companies are subject to income tax on their global income. As for non-tax resident companies, tax will only be imposed on the income derived from Singapore. Due to the fact that Singapore has developed an extensive double tax network with over 80 countries, a company could take advantage of this or other special administrative expenses to make additional tax agreements. All companies incorporated in Singapore are required to register for GST if their annual turnover exceeds or is likely to exceed S$1 million. Upon incorporating a company in Singapore, registration is not mandatory, however, upon reaching the turnover freedom, the company will need to retrospectively register for GST from the date the company was incorporated. There are different compliance requirements for tax purposes for each business and tax period. Companies must abide by ACRA’s guidelines and provide audited and unaudited annual financial statements, Corporate Service Providers (CSP), and external auditing requirements to run a tax-efficient company in Singapore.
On ACRA’s website, foreign directors are required to produce the following documents during the application of an Employment Pass: a copy of their highest educational certificate and an employer’s list from countries or companies they were employed with. If the company is a branch or subsidiary of a foreign company, more detailed compliance requirements and documents are required. These include documentation such as parents’ company sales and purchase invoices, financial statements of parents’ company, and brochures of parents’ company if available. The annual filing of a Singapore LLC includes the submission of audited and unaudited annual financial statements to view the balance sheet, income statement, statement of equity, and cash flow statement of the company to help understand the subsidiary’s financial structure and performance. It is highly recommended for companies to seek advice from professional service firms such as accountants beyond Singapore and external auditing firms.
Filing Documents with the Accounting and Corporate Regulatory Authority (ACRA)
Once a company is incorporated, ACRA will issue an electronic certificate of incorporation as proof of the company’s registration. The certificate contains the Unique Entity Number (UEN) which identifies the company the same way a person’s identity card distinguishes an individual from another. It can be used for transactions/interactions that require identification, such as opening a bank account, handling annual filing requirements, and signing contracts/entering into agreements. The certificate also contains a Company Inauguration Date, the date the company was registered. It is important to preserve the electronic certificate of incorporation because it is the legal proof of the company’s registration and status. It can be replaced with a hard copy certificate, but in case of loss or if the hard copy certificate is altered, you can print another electronic copy from ACRA’s website using a personal or corporate SingPass account.
To incorporate a company, you must first register it with the Accounting and Corporate Regulatory Authority (ACRA) by filing the necessary documents. These documents usually comprise the company’s constitution, the Memorandum and Articles of Association (M&AA), and information about shareholders/chairpersons. You also need to provide full details of the initial officers of the company, including their particulars and consent of the directors and company secretary to act as one. It is important to avoid errors when filling up these documents because ACRA has rules that render documents with easy mistakes as non-compliant.
Meeting Annual Filing Obligations
What must be filed: A set of audited/unaudited financial statements, a copy of the director’s report/chairman’s report, a resolution to lay the financial statements at the AGM, and where applicable, a copy of the special business resolution that has been approved at the AGM. Where: ACRA When: Within a month of the AGM not recognized as a small company where: ACRA, IRAS When: Within a month of the AGM (ACRA), within 7 months after the end of the financial year (IRAS). What must be filed: A set of unaudited financial statements (where the company is dormant from the date of incorporation, a set of financial statements is not required). Where: ACRA, IRAS When: Within a month of the AGM (if unaudited financial statements are filed, they must be accompanied by a director’s statement that the company was dormant from the date of incorporation or from a specific date), or within 7 months after the end of the financial year (IRAS).
The filing obligations for small company, dormant company, and company under the winding up or liquidation are different. Therefore, it is important to be alert to both the requirements that must be met and what must be submitted to ACRA within the stipulated time. This is a major part in the process of company incorporation in Singapore. Before proceeding, do note that these obligations are imposed on the date of the AGM. In the case of an EPC, the obligation arises the day after the financial statements are circulated to their members.
Keeping Proper Accounting Records
The Singapore Companies Act also necessitates the filing of full audits for companies. Only small companies can apply with ACRA as they can be exempt from filing full audits. A company will be considered a small company if it meets two of the following criteria for each immediate financial year: Its total annual revenue for the financial year does not exceed S$10 million, its total assets at the end of the financial year are no more than S$10 million, or it has no more than 50 employees at the end of the financial year. Also, the company’s annual revenue would be defined financially. However, a company will be considered not small in the immediate preceding financial year if it does not meet at least two of the three mentioned above criteria in the immediate preceding year.
The Singapore Companies Act requires each company to keep proper accounting records which allow the company to disclose with reasonable accuracy the financial position of the company at any time. Proper accounts must provide enough information for the company to prepare financial statements that comply with the Act and any accounting standards issued by the Accounting Standards Council (ASC). Proper accounting records must be kept at the company’s registered office in Singapore or if the company chooses to keep accounting records at another place, then the company must make arrangements that allow accounts to be immediately produced when requested by the directors and auditors. Criminal penalties may be imposed for those who fail to comply with these requirements.
Setting up a company in Singapore is a challenging hurdle for both local and international businessmen. The incorporation process for individual company formation is much easier, providing the company directors fulfill their legal requirements under the Singapore Companies Act such as appointing at least one local Company Secretary within 6 months of company incorporation, preparing an office space and opening a corporate bank account for company operation, etc. For foreigners to set up a company in Singapore and proceed with other company-related functions such as business registration and product launching, they have to relocate to Singapore. Not only staying longer in Singapore can help this happen, but they also have to invest in a local incorporation specialist for a fast and practical solution. Also, foreign investors should check the Singapore company incorporation roadmap and file incorporation documents timely. With a reliable, experienced company incorporation specialist on board, such as VentureHaven, this process will become a matter of only two to three days.
Setting up a company in Singapore is not only a straightforward process but also an essential step to expanding your business. While setting up a company in Singapore can be a burdensome and time-consuming process, it is crucial for foreign entrepreneurs to navigate the company incorporation process without any hindrance. That’s why entrepreneurs should first get to know the process of Singapore company formation before they jump into the game. Prior to this, it is prudent to consider the factors below in order to reap the most benefits for your business.