Singapore, or so-called the Switzerland of Asia, is one of the world’s major financial centres, and many foreigners select it as an ideal destination to start a business in Asia. As one of the least corrupt countries in the world, foreigners find it easy to conduct business here because it also stands out as a viable destination for foreign exchanges of currency, and a prime area for global investment.
Singapore is also full of diverse cultures, and home to abundant business opportunities that foreigners can take advantage of by understanding the local business laws and methods of starting and expanding their businesses.
There are three options foreigners can select to set up a company in Singapore:
- Option 1: Private Limited Company + Employment Pass
- Option 2: Private Limited Company + EntrePass
- Option 3: Appoint a Local Nominee Director
Incorporate Your Company and Relocate to Singapore
For Option 1 and Option 2, you must incorporate a Private Limited Company (Pte. Ltd) in which only 50 or less people can hold shares, and the public is not allowed to access them.
You must then apply for an Employment Pass or Entrepreneur Pass through the Ministry of Manpower (MOM) as a prerequisite for managing your business operations while in Singapore. Both are for individuals, including employees, and not the business. Each is valid for 1 or 2 years, and renewable for up to 3 years as long as the pass holder remains employed.
The EntrePass allows eligible foreigners to start and operate a new business in Singapore while Employment Pass allows foreign talents with professional backgrounds to be employed in Singapore.
Option 1: Private Limited Company + Employment Pass
An Employment Pass (E Pass) can only be applied once the company is incorporated.
To be considered for an E Pass, the foreigner must fulfil one or more of the following:
- A job offer in Singapore
- Earn a fixed monthly salary of at least SGD$3,600
- Acceptable educational qualifications, professional qualifications or specialist skills
- Related work experience such as managerial, executive or specialised job.
Option 2: Private Limited Company + EntrePass
An Entrepreneurship Pass (EntrePass) is for serial entrepreneurs, high-calibre innovators or experienced investors that want to operate a business in Singapore.
To be considered for an EntrePass, the foreigner must:
- Submit a business plan that details an innovative business idea.
- Have started, or planned to start a private limited company registered with ACRA.
- Have a minimum paid-up capital of SGD$100,000.
It is important to note that if you have already registered the company, it must be less than 6 months old from the date of EntrePass application. However, if not yet registered, you can do so after your application is approved.
With the stringent requirements for EntrePass application, you should to first research on business ideas associated with well-established industries in Singapore, such as the ICT industry. This will place your company at the forefront of benefitting from government incentives and receiving support from renowned research institutions or government-approved incubators. Since Singapore is famous for technological savviness, it’s fairly easy to reach out to venture capitalists or incubators via digital technologies, such as email or Skype.
Incorporate Your Company and Run It from Overseas
Option 3: Appoint a Local Nominee Director
If you are a foreigner and you’d like to run your business from overseas without relocating to Singapore, you can simply go through the same incorporation process required for local residents, but you must appoint a local resident director to manage your business. You are at liberty to incorporate any type of business structure, including sole proprietorship, partnership, or any Limited Liability Company (LLC).
The nominee director may either be one of your local contacts whom you have established a relationship of mutual trust and understanding with, or you can appoint a totally new face. Normally, any corporate secretarial service provider would provide you with contacts for a nominee director. However, if you also wish to reside in Singapore to oversee the operations of your company, you must apply for an EntrePass through MOM.
According to the Singapore Companies Act, newly incorporated businesses must hire a company secretary within six months. The company secretary acts as the head administrative officer. Tianlong Services offer corporate secretarial services and takes pride in assisting all clients in being compliant. We can help you manage legal and board procedures of your business through our top notch and cost-effective services with much appreciated timeliness.
On the other hand, already incorporated foreign companies that wish to set up offices in Singapore can choose one of the following business structures:
In Singapore, a branch office (BO) functions as an extension of the parent company and does not have a separate legal entity. It must be registered with the Accounting and Corporate Regulatory Authority (ACRA) and all its liabilities affect the parent company.
Foreign companies can register a representative office temporarily to carry out research and marketing undertakings before investing in Singapore. The parent company cannot engage in profit-making activities with this business structure because it also lacks any legal status.
It functions like a private limited company that has its parent company as the major shareholder. Many foreigners in Singapore prefer setting up a subsidiary company because it allows 100 percent foreign ownership and it has a separate legal body. Furthermore, tax rates match that of local companies.
In summary, most foreign entrepreneurs always go for Option 1 because the application process and requirements for an Employment Pass is less demanding compared to an EntrePass. However, it is important to train internal employees on their roles and responsibilities before they undertake the role of a director. Alternatively, you should ensure that you consult with a reputable professional corporate services firm like Tianlong to steer your company in the right direction with respect to complying with all statutory requirements.
Contact us for a discussion today!