You’ve landed on new shores, or perhaps you’re ready for a new path on your career trek, and you’ve got plans to set-up in business. But have you really thought about what it takes to form a company in Singapore asks Charley Larcombe?
It took me forever to find a job. I rather arrogantly thought that down to international experience I’d find an Editor role not long after stepping off the plane. A week went by, then a month, then two… I was a total nightmare to live with because not only was I broke, bored and bitchy; I’m simply unsuited to not working. It reduces me to total laziness. You know that saying “if you want something doing, ask a busy person”? Yep, I had all the time in the world and I spent about half of it being productive by job searching and the other half fretting.
I also spent time looking into setting up my own freelance company. Researching ACRA and MOM and numerous other acronyms; talking to anyone I met who’d launched a business here; reading The Entrepreneur online every day… left me none the wiser. Especially as the information seemed to be so conflicting – and ever-changing. Nightmare.
Recently I met up with Katherine Chapman – you can catch her at one of the ANZA business events later this year. Her company, CSLB, essentially leads you through the jungle that is company set up here in Singapore. 45minutes with her and… well it’s still a jungle out there, but it is definitely possible to be the King.
As well as the numerous questions I had on business set ups, we did also discuss a couple of other options…
Stop. And think.
Your wife/husband/ partner is offered an incredible opportunity and you get caught up in the excitement of new adventures and all of the travel that makes Singapore such a good base. You hand in your notice and think that you’ll look for work once you land and once you’ve settled the most pressing issues – where are we going to live? Will the kids have a school space? Where stocks that familiar brand of coffee? There’s lots of chat from the respective HRs assuring your significant other that there are plenty – and most importantly easy – options for you. Oh how reality differs…
So take a breath and first of all talk to your employer – you may be surprised that they’ll be willing for you to work remotely.
Of course, this is all well and good but we’re already here; you’ve probably already done the move. It’s always easy to look back and say, “If only I’d…” – but maybe there is still the opportunity back at your previous role to enquire. It’s worth a shot.
Set up at home
“A Letter of Consent (LoC) will not be required when:
- The Dependent’s Pass (DP) holder is working for an overseas company from home; and
- The overseas company has no local presence; and
- The DP holder is not meeting or providing services to clients in Singapore.
- Therefore, you may still perform work for your overseas employer via telecommunicating from home if all the above requirements are met.”
So states the MOM. They don’t mind you working here… if you’re not really working here. If you’re working from home, on your offshore company and not meeting clients here in Singapore, you’re good to go. Being a boss. In your pyjamas. SOLD.
Alternatively, if you’re adamant about launching your business here, you really have two options.
A SOLE PROPRIETORSHIP
WHAT IS IT?
It’s a business owned by one person or one company. There are no partners and the Sole Proprietor (SP) has complete influence in the running of the business. If you are either a Singapore citizen, a PR, a foreign individual deemed as a person living outside of Sing’ or a local company, then you are eligible.
WHAT DO YOU NEED?
- Get approval for the business name with ACRA.
- Provide a description of the actual business – i.e. what will you be doing?
- Register the business address. Homeowners can conduct small-scale businesses out of their residential property as long as they’re not employing ‘external employees’ and must have written go ahead to use their homes for home office use.
ADVANTAGES
- It is the easiest and least expensive business structure to set up
- Terminating a SP is easier, less time consuming and less expensive than other business entities.
- You are free of the obligation of filing returns annually and only need to renew your membership either every year or three years.
- Profits of the SP are treated as income of the individual who owns the entity and this is subjected to a tax rate as that of personal income (0-20%).
DISADVANTAGES
- The registered owner is financially and legally responsible for all debts.
- Creditors may sue for debts incurred and can obtain a court order to claim your personal assets.
- Capital is limited to your personal finances and the profits generated by the company so business expansion is limited and difficult.
- You can transfer the business only by the sale of assets, not the name.
- To work for an SP, you cannot apply on an Employment Pass (EP).
WHAT DOES THIS MEAN?
A Dependent Pass (DP) holder can no longer set up as a SP – contrary to what you’ve heard or read in the past. The MOM still issues Letters of Consent for DPs to work for an SP owned by a Singaporean or PR etc. Ergo, if you have your Big Idea, you can go into business with a PR etc., but they own your business on paper – you take the risk of losing out. The owner can request a LoC from the MOM that will enable you to work FOR the business. Most of the time, the owner is a friend you are setting up with, but to avoid any nasty surprises, protect yourself and them by drawing up an employer/employee contract.
A PRIVATE LIMITED COMPANY
WHAT IS IT?
It is a registered business under the Companies Act, Chapter 50 and is the favourable legal option. It has rights to own properties, has perpetual succession and can sue or be sued in its own name. It is locally incorporated with a maximum of 50 shareholders. Singaporeans or PRs are eligible.
WHAT DO YOU NEED?
— Company
What are you called?!
Preferred registration date.
What you’re doing.
Registered company address
— Ownership Details
Share capital amount (in $) & no. of shares
Allocation of shares among shareholders
— Management Details
Confirmation of who will be the company Directors
Confirm that at least one is Singaporean or PR
ADVANTAGES
- Shareholders are not personally liable for debts and losses.
- Profits are taxed at corporate tax rates which benefit from tax exemptions and incentives.
- There are no taxes on capital gains so this allows private business to distribute dividends to shareholders without incurring any tax liability.
- Shareholders’ personal assets are protected
- Company shares can be easily transferred from one member to another.
DISADVANTAGES
- Directors must disclose their interest in the company’s shares, contracts and debentures.
- Governed by Singapore Companies Act and violations will result in penalties. Annual Returns and Directors’ reports are required and must be filed, so the company must have at least one Director and one Company Secretary
- Operation costs are higher
- Must maintain on-going compliance with ACRA/IRAS.
WHAT DOES THIS MEAN?
There is plenty left to cover with this option, but you’re still facing a similar issue if you’re here on a DP. Once the company is registered, directors appointed, share capital and shareholders shown, company address registered as well as a company secretary on the books, the PTE LTD then needs to set up a bank account – never the most straight forward situation. And only then can the company approach the MOM to request a LoC or an EP for you to again technically work FOR the company.
Essentially, it IS possible, but there are hurdles to overcome. This article gives you the basic overview and hopefully offers an insight into what may work best for you. If I was in your Big Idea shoes though I would still go and speak to someone like Katherine. As with any aspect of your business, you’ll want to be bouncing ideas off someone, gathering information or asking questions – and you may as well start from the set-up stage!
Feeling business-inspired? Meet Katherine Chapman at the final event in ANZA’s Helping You Understand The Job Market series (register here)?
