legal requirements company set up Singapore in 2023 : That Singapore is one of the most competitive economies is not in doubt. Perhaps this explains why it’s a popular destination for businesses that want to establish and expand into the rest of Asia. Setting up a company in Singapore requires a comprehensive understanding of the legal requirements involved.
Singapore, just like other jurisdictions, has a well-established legal framework.
This legal framework governs company formation and operation and ensures a transparent and business friendly environment. By complying with the set legal requirements, entrepreneurs and businesses can enjoy a wide range of benefits that come with setting up a business in Singapore. Some of the benefits of establishing a business in Singapore include:
- Stable political and economic environment
- Strategic location: Singapore’s strategic location at the heart of Southeast Asia makes it an ideal destination to make forays into the regional markets.
- Singapore has a strong legal system that upholds the rule of law and ensures a fair and transparent legal environment.
- Singapore has an extensive network of free trade agreements (FTAs) with many countries globally. These FTAs facilitate trade and investment hence granting businesses preferential access to multiple markets and enabling them to expand globally.
- Singapore has a favorable and attractive tax system with competitive corporate tax rates and various tax incentives.
- Robust intellectual property protection.
- Singapore has a skilled and diverse workforce. As such, businesses can benefit from a pool of highly skilled professionals.
By understanding and complying with the legal requirements for company set up in Singapore, companies and businesses can unlock these benefits and thrive in a dynamic business ecosystem.
Types Of Business Entities
In Singapore, there are several types of business entities. These are:
- Private Limited Company
- Partnerships
- Sole proprietorships
Private Limited Company
A private limited company is the most common and preferred business entity in Singapore. It is a separate legal entity from its owners and provides limited liability protection (shareholders’ personal assets are protected). Some of the advantages of a private limited company include:
- Limited liability which means the personal assets of shareholders are protected.
- Access to corporate tax benefits and incentives.
- Easy transfer of ownership through the buying and selling of shares.
- Greater capacity to raise capital through the issuance of shares.
Partnerships
In Singapore, partnerships can either be Limited partnerships (LPs) or General partnerships (GPs). Partnerships are particularly suitable for businesses with multiple owners who are looking for flexibility and shared management responsibilities. Some of the advantages of Partnerships include:
- They are easy and less expensive to set up when compared to private limited companies.
- There is no corporate tax. Profits are taxed at the partner’s individual tax rates.
- Shared management responsibilities and decision-making.
- Simple and flexible structure.
Sole Proprietorship
This is the simplest and most straightforward business structure. It is suitable for individuals running a business on their own. It is not a separate legal entity and the owner has unlimited personal liability for the business‘s debts and obligations.
Some of the advantages of a sole proprietorship include:
- It is very easy and inexpensive to set up.
- The owner has complete control and decision-making authority.
- Simpler tax reporting as business income is part of personal income.
When choosing the appropriate business entity type in Singapore, consider the specific needs, long terms goals, and scale of your business. If you are unsure, you can always consult with a legal professional or business advisor such as MBiA in order to make an informed decision.
Company Registration Process
The World Bank has consistently ranked Singapore as one of the most business-friendly regulatory environments in the world. And one of the reasons for this is because of the straightforward legal requirements for company set up in Singapore. Having said that, let’s take a look at the legal requirements for a company set up in Singapore.
1. Choose a company or business name
You must select a unique and meaningful name for your business or company. By unique we mean that your chosen name cannot be identical to any other existing name. By meaningful we are alluding to the fact that your chosen name shouldn’t contain undesirable or prohibited words.
The company name you choose must comply with the guidelines provided by the Accounting and Corporate Regulatory Authority (ACRA) in Singapore.
2. Engage the services of a registered filing agent (RFA)
Registering a business on your own can be a tad challenging especially if you are clueless on the legal framework and the requirements. For this reason, it is important that you engage a qualified Registered Filing Agent (RFA). This could be a law firm or a corporate service provider such as MBiA to help you with the company registration process.
3. Prepare the required documentation
There are a number of documents that you need to prepare and they include:
- The memorandum and articles of association: The memorandum and articles of association basically outlines the company’s constitution, its activities, and internal regulations.
- Shareholder’s agreement: If applicable, it is important that you draft a shareholders agreement. The agreement defines the rights, obligations, and responsibilities of the company’s shareholders.
- Consent to act as director: Endeavor to obtain written consent from the proposed directors to act in their respective roles.
- Identification documents: You should gather identification documents such as passport copies for all the directors and shareholders.
- Registered office address: Provide a locally registered physical address for the company. It must not be a P.O box but a physical Singapore address.
- Submit Application to Accounting and Corporate Regulatory Authority (ACRA)
Your registered filing agent (RFA) will submit all the necessary documents and forms to ACRA through an online filing system known as BizFile+
- Pay the required Fee
You should pay the registration fee and another fee for the issuance of the Certificate of Incorporation (COI).
- Company name approval
ACRA will then review the proposed company name for compliance and availability. Once the proposed company name is approved, it will be reserved for 120 days.
- Obtain a Certificate of incorporation
Once the application is approved, ACRA will issue a certificate of incorporation (COI). This particular certificate signifies the successful incorporation of the company.
- Set Up Statutory Records
You are required to maintain statutory records. This includes the register of directors, shareholders, and officers. Most importantly, the records must be kept at the registered office address in Singapore.
- Register for Goods and Services Tax (GST)
Please note that if you expect your business to have an annual turnover of more than 1 million SGD, it must register for Goods and Services Tax (GST).
- Licenses and permits
Depending on the nature of your business or the industry it is in, you might need to obtain additional licenses or permits from relevant government agencies.
- Ensure ongoing compliance
Your company being registered is not an end in itself. You have an obligation or rather your directors are obligated to ensure that the company is compliant with the Singapore law. In this light, you should ensure that you file annual returns, file compliance returns, and file GST where necessary.
Most importantly, please note that the company registration process may vary depending on the specific circumstances and requirements.
Working with an experienced RFA such as MBiA is instrumental in ensuring compliance with all the necessary steps and documentation. You are highly advised to seek professional advice to ensure that the process is seamless.
Share Capital Ownership Structure In Singapore
· Minimum paid-up capital
The minimum paid-up capital for companies in Singapore is SGD 1.
· Authorized share capital
It is imperative to note that Singapore doesn’t have an authorized share capital concept. In its stead, companies have issued share capital. The issued share capital represents the actual shares held by shareholders.
· Shareholding distribution
It is up to the shareholders to determine their shareholding distribution based on their agreed terms and conditions. The distribution can be equal or proportional to the investment or ownership stake of each shareholder.
Consequently, the number of shareholders can range from a minimum of 1 to a maximum of 50 for a private limited company in Singapore.
Taxation And Incentives For Companies In Singapore
1. Corporate tax rates
Singapore follows a territorial tax system. What this means is that taxes are levied on income derived from Singapore and certain foreign-sourced income remitted to Singapore. The corporate tax rate is a flat 17% on chargeable income for both local and foreign companies.
2. Goods and Services Tax (GST)
The goods and services tax (GST) refers to a consumption tax that is imposed on the supply of goods and services in Singapore. As of 2023, the GST tax rate is 8%.
3. Tax incentives
It is important to note that Singapore offers several tax incentives for the purposes of promoting specific industries, encouraging investment, and fostering economic growth. Some of the notable tax incentives include:
- Startup tax exemption (SUTE): Newly incorporated companies can enjoy SUTE for the first 3 consecutive years of assessment. Qualifying companies under SUTE have a 75% exemption on the first SGD 100,000 of normal chargeable income and a 50% exemption is given on the next 100,000.
- Partial Tax exemption (PTE): After the SUTE period, companies can benefit from partial tax exemption (PTE). Under PTE, qualifying companies receive a 75% exemption of the first SGD 10,000 or normal chargeable income and a 50% exemption on the next SGD 190,000.
- Industry specific incentives: Singapore offers targeted tax incentives for specific industries such as research and development, international trading, biotechnology, and financial services. These incentives include reduced tax rates, investment allowances, enhanced deductions for qualifying expenditures, and pioneer incentives.
To wrap it up, understanding and complying with the legal requirements for company set up in Singapore is instrumental for entrepreneurs and businesses seeking to establish their presence in Singapore.
While the process might seem herculean to a business owner with limited knowledge of Singapore legal framework, there is no need to worry. You can always enlist the services of a corporate service provider such as MBiA to help you navigate the process of a company set up in Singapore.