Boasting a world-class infrastructure, Singapore has established a strong reputation as a global business hub in the heart of Asia. Having ranked 1st in the Global Competitiveness Report 2020, Singapore’s competitive economic environment provides a fertile ground for starting a small business in Singapore. Furthermore, the ease of starting a business can also be attributed to the fuss-free process for individuals who wish to register company in Singapore. Whether you are an aspiring entrepreneur or an experienced business owner, we will explore X things to know before starting a small business in Singapore.
1. Determine the viability of your business idea
Starting a business is no easy venture. While you may have a long list of great business ideas, how viable is your business idea? Therefore, before deciding on a business idea, you should ask yourself these questions such as:
- How feasible and sustainable is my idea in the long run?
- What unique selling points will my business have?
- Am I meeting a need or providing a solution to a problem?
- Are there other brands already doing this? If so, what differentiates me from other businesses?
To take a step further in determining the viability of your business idea, you may wish to conduct focus groups or surveys to find out if there is a sizable niche market for your brand.
2. Draft a business plan
After you have decided on a business idea, you can proceed to draft a business plan to kickstart your entrepreneurial journey. However, it is not necessary to come up with a very comprehensive business plan. It should include these main points, such as the executive summary, company overview, target audience, marketing plan, financial plan and operations plan.
3. Calculate the financial costs for your business
Prior to starting a business, it is imperative to come up with a financial plan to get your business running. Have you thought of where you will obtain funds from? It may be from your personal savings, borrowing from acquaintances, crowdsourcing or an investor. There are two types of costs you will need to take note of, capital cost and fixed cost.
Firstly, capital costs are initial expenses necessary to open your small business, and are usually one-time expenses. These costs include the costs of setting up signage and physical materials, or website fees for e-commerce businesses. Secondly, fixed costs are regular expenses regardless of whether your business is making a profit, which includes employees’ salaries, office rentals and utility bills. It is crucial that you have an emergency fund for unforeseen expenses.
However, you may wish to obtain additional funding if you lack funds to run your business. There are numerous schemes implemented in Singapore to help small new ventures. For example, SPRING Singapore has schemes such as Business Angel Scheme, SPRING Start-up Enterprise Development Scheme, Technology Enterprise Commercialization Scheme and Sector-Specific Accelerator Programme.
4. Register a business name
Prior to Singapore company incorporation, you will have to register a company name with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+. Company names are subjected to several guidelines, which includes not registering a name identical to another Singapore company, does not contain profanities and must not infringe on any trademarks. To avoid choosing an identical business name as others, you can check the availability of the name via BizFile+.
The name application costs $15 and name approval takes approximately an hour if all guidelines are met. After your company’s name is approved, it can be reserved for up to 120 days. If the business is not incorporated using the name within 120 days, the name will then be released.
5. Choosing the right business entity
Singapore features a wide range of forms of corporate entities for business owners to select, with each corporate entity suited to different types of business activities. Foreign companies that wish to operate a business in Singapore can choose between these 4 types of business entities.They are the representative office, Limited Liability Company (LLC), branch office and Limited Liability Partnership (LLP).
Before beginning the Singapore business registration process, it is essential to first understand your business model completely, so that you can pick the corporate entity that best fits your business. Some of the factors that you should take into consideration include the potential liabilities incurred, tax and compliance obligations and the type of business activity intended.
6. Understand tax obligations
With Singapore having one of the world’s simplest and most rational tax systems, it is imperative that you understand your tax obligations so as to avoid any legal complications in the future due to non-compliance. Here are some things to take note of when starting a business in Singapore:
- Capital gains or business dividends will not be taxed.
- Both corporate and personal taxes in Singapore follow a tiered tax system. New firms receive significant tax breaks during their first 3 years, which lowers their tax rate to 0% for the first S$100,000 of income. The maximum rate for corporate taxes is up to 17%.
- Similarly, the personal tax rate starts at 0%, rises very gradually to a maximum of 20% for incomes above S$320,000. Corporate earnings transferred to shareholders as dividends will not be double-taxed, meaning that dividends will be distributed tax-free. Finally, Singapore charges one of the lowest value-added tax rates in the world at 7%.
- Profit repatriation is not restricted in Singapore. Capital profits from business sales and dividends paid to shareholders will not be subjected to taxes.
- The transfer of foreign currency in and out of the country is not restricted to Singapore.
7. Register a Singapore office address
For companies in Singapore, it is mandatory to provide a local Singapore address as the business address, as using a P.O. Box address as the address of the business is not permitted. Under the Home Office Scheme, you can use your residential address as the business address but it is necessary to obtain approval before your business registration with ACRA. If you are residing in a HDB flat, you will need to seek approval from the Housing Development Board (HDB). If you are residing in a private residential property, you will need to seek approval from the Urban Redevelopment Authority (URA).
8. Register your business
The process to start a business in Singapore is simple and hassle-free. This can be attributed to the minimal requirements to set up a new company in Singapore, which includes a minimum paid-up capital of $1, a company secretary, a resident director, a shareholder and a Singapore registered office address. To set up a sole proprietorship in Singapore, you will have to register your company with the Singapore company regulator ACRA (Accounting and Corporate Regulatory Authority).
To register a sole proprietorship in Singapore, individuals have to be at least 18 years old and they must either be a Singapore citizen, Singapore Permanent Resident or an EntrePass/Employment Pass holder. However, if you are a foreigner, you can appoint at least one nominee resident director and have to engage a registered filing agent to submit the application via BizFile+.
Singapore company registration is hassle-free if you are familiar with the entire incorporation process. Tetra Consultants strives to provide our clients with a seamless experience when setting up a company in Singapore. Our team of experts will ensure that your Singapore company can be operationally ready as soon as possible.