How To Start A Business In Singapore As A Foreigner
Singapore is one of the most business-friendly countries globally. It is relatively easy for eligible foreigners to set up a business here. This article aims to guide you on how to start a business in Singapore as a foreigner.
Different business structures for foreigners
A foreigner can choose the business structure he wishes to adopt, namely sole proprietorship, partnership and company.
Each structure has its own advantages and disadvantages, and certain requirements may apply, especially if the foreigner cannot be physically present in Singapore for the setting up of the business. The summary is as below.
Sole proprietorship
A sole proprietorship is where one person owns and runs the operations entirely by him or herself, or a so-called one-man show. It is the cheapest and simplest of all business structures to incorporate and run.
Sole proprietors can take all profits from their business and have very minimal compliances or reporting requirements to Singapore authorities such as Accounting and Corporate Regulatory Authority (ACRA). However, the downside about this structure is that the business owners are personally liable for all the business’s debts and any legal action taken against the business.
You can complete the sole proprietorship registration online through the BizFile+ portal using SingPass. As a foreigner, it is advisable to engage the services of a registered filing agent such as us.
In general, it is not necessary to be physically present in Singapore to register a sole proprietorship as a foreigner.
However, if he or she does not live in Singapore, the sole proprietor must appoint one authorised representative, who is a resident in Singapore (potential representatives include Singapore citizens (SC), Permanent Residents (PR) and EntrePass holders).
The purpose of this authorised representative is to receive notices on behalf of the company and be responsible for all Singapore operations to the relevant authorities
Please refer to our other guides on authorised representatives as well as forming a sole proprietorship.
Partnership
At least two partners, to a maximum of twenty, can form a partnership. Just like a sole proprietorship, partnerships are very simple and cheap to incorporate, with little compliance or reporting requirements.
Similar to the above, partners are personally liable for all the debts that the partnership incurs, (inclusive of those incurred by your partners) and any kind of legal action taken against it. As such, a very high degree of trust between the partners and a need for a cohesive partnership agreement is very important.
Partnerships registration is similar to the process of sole proprietorship registration. This will include engaging a filing agent and appointing an authorised representative if you are not living in Singapore. Like a sole proprietorship, you can register a partnership without the need for any of the partners to be present physically in Singapore.
Do refer to our guide on forming a partnership for details.
Company
Incorporating a company is a little more time-consuming but offers plenty of advantages compared to sole proprietorship and partnership.
A company is a separate legal entity from its owners, this means that the owners are not personally liable for any debts or legal action that is taken against the company.
Having said that, companies are subjected to more stringent compliance requirements (for example like filing of annual returns and holding of annual general meetings) and it takes longer to wind up (it can take 5 months for a company to be struck off from the register) a company.
There are two main scenarios where foreigners seek the incorporation of companies:
- Foreigners who wish to set up a company in Singapore personally; and
- Foreign entities who wish to expand into Singapore.
To set up a local company in Singapore as a foreigner
Foreigners can incorporate a company on the BizFile+ portal with their SingPass account.
It is a requirement for all companies to have at least one director who is a resident here in Singapore. The foreigner must appoint a nominee director if he or she does not live in Singapore and has no intention to.
However, if he or she wishes to manage the business himself or herself in Singapore, he or she can use the newly incorporated company and apply for an Employment Pass (EP) from the Ministry of Manpower (MOM). To achieve a higher success rate for EP applications, your company should aim for a paid-up capital of a minimum of SGD $50,000 and of course fulfil other important requirements.
Please refer to our guide on Singapore company registration for more information.
Foreign companies setting up in Singapore
If a foreign entity (rather than an individual) wishes to get incorporated in Singapore, there are 4 options available – a subsidiary, branch office, a representative office or re-domiciliation.
Each option has its advantages and disadvantages, as well as other things to consider such as tax exemptions or liabilities and extent of company liability. You or your company will have to take these into considerations and decide which is the best option.
Refer to our guide on how you can incorporate your foreign company in Singapore for more details.
Can foreigners who hold certain passes in Singapore, allowed to start a business in Singapore?
Singapore allows foreigners to start businesses in Singapore in general. But foreigners who are already living in Singapore holding a certain pass may be prohibited from starting businesses under the terms of that pass (refer to the table below).
In general, most passes (e.g. EP or Work Permits [WP]) do not allow their holders to be managing businesses in Singapore. This simply means that these pass-holders are not able to set up sole proprietorships or partnerships.
However, they can still incorporate and own shares in companies, but they cannot be the director of the company. The pass-holder cannot apply to work for a company that they hold shares in.
How is the Dependent’s Pass and Long-Term Visit Pass different?
The situation for holders of a Dependant’s Pass (DP) or a Long-Term Visit Pass (LTVP) is slightly different.
If a DP holder wants to set up a business in Singapore, they may:
- First register a sole proprietorship, partnership or company. For a company, they need to own a minimum of 30% of the shares in the company;
- Apply for a relevant work pass
If an LTVP holder wants to start a business in Singapore, they may:
- Register a company first, list someone who is a resident in Singapore (such as an SC or PR) as a director of the company. The pass-holder must not be either a shareholder or director of the company at the time of incorporation; and then
- Using the Singapore company to apply for a Letter of Consent (LOC) from MOM on their behalf, which will allow them to work for that company. (This LOC is different from the one DP holders need to operate a business in Singapore.)
The advantage of an EntrePass
EntrePass holders enjoy the most flexibility when incorporating a Singapore business.
The EntrePass scheme is designed specifically for eligible foreign entrepreneurs, who want to start and operate a new business. EntrePass holders are given a huge range of benefits – they can set up any business with any legal structure (sole proprietorship, partnership or company). They also have the right to bring their spouse and children to Singapore by applying for DPs for them.
Eventually, EntrePass holders can also be eligible for applying to be a PR in Singapore. It will be a good idea for any foreigner who plans to set up a business in Singapore, to consider applying for an EntrePass from MOM if they satisfy the requirements.
You can refer to our guide on the EntrePass application for more details.
Summary of allowed business structures:
| Type of Pass | Sole Proprietorship | Partnership | Company |
|
Not allowed | Not allowed | Pass-holders can set up and own shares in a company but cannot be a director or an employee of the company |
|
Not allowed | Not allowed | Pass-holders are allowed to set up and be a shareholder in the company. But, pass-holders who wish to work in the company (as either a director or employee) will have to incorporate a company first, and they are neither a director nor a shareholder of this company. And get the company to apply for a LOC from MOM. |
|
Allowed, with LOC | Allowed, with LOC | Able to, but pass-holder must own 30% of the shares in the company minimum, and also apply for a LOC. |
|
Allowed | Allowed | Able to |
Can foreigners operate a business from home in Singapore?
The Singapore government allows foreigners who want to operate a small business from their Singapore homes (for example a home bakery) can do so under the Home-Based Small Scale Business Scheme, subject to the conditions of their passes.
This means that only EntrePass holders, DP holders or LTVP pass-holders with a LOC from MOM, can operate businesses from their homes.
Additionally, you must take note that the businesses have to respect the property’s residential nature and observe certain guidelines. Such as:
- Not to employ any persons outside of the household.
- No display of any paid or physical advertisements (business signboards etc.).
- Not to introduce increased traffic and human traffic to the place.
- Not to introduce noise, smoke, smell, effluent or dust nuisances/danger to the neighbouring residents.
- No Unloading or loading of goods by vans or trucks must not be allowed.
- Activities of the home business must comply with the relevant authorities rules and regulations such as food and hygiene laws, fire safety requirements.
You should also take note that addresses of HDB flats cannot be registered as business addresses. However, the Home Office Scheme allows some exceptions of businesses in certain industries.
Since the business registration requires a valid business address, foreigners who want to set up a small business from their HDB flats, have to make the necessary arrangements and register a different business address instead. This can be done by employing the services of a corporate secretarial firm offering virtual business addresses in Singapore.
What’s next after incorporation?
Registering a business is just the first step in setting up a business. After that, the actual operation and management of the business can begin.
Take note that the following steps are not applicable if you hold certain passes with their respective restrictions.
Applying for a corporate bank account
Normally, one of the most important things to be done after incorporation is the setting up of a corporate (business) bank account for the company. This is critical as you need to separate your personal and business expenses for accounting purposes and accountability to stakeholders. This allows for business liability to be limited to the company’s assets in the case of companies.
Firstly, the incorporation of the company must be completed before the bank arranges for the bank account opening appointment.
Most banks require the company’s directors to be present physically, though in certain cases some banks may allow verification to be done online via the phone or video conferencing. This is purely on a case-by-case basis.
If the bank requires the company directors to be physically present, it is advisable to only book the flight tickets to Singapore only after the confirmation of the appointment with the bank.
Please refer to our article on the opening of corporate bank accounts in Singapore for more details.
Employing employees
Sometimes, the business may need to hire employees to execute various company functions.
The workforce in Singapore is highly skilled to meet most international firms’ demands. To facilitate the search for such labour, there are many popular local job websites for employers to use. You can also employ overseas employees through various work pass applications from the Ministry of Manpower.
For more details on the relevant compliance requirements, refer to our article on the employment of employees in Singapore.
Renting an office
If your business is a non-home-based business, you may need to rent offices or business premises for your operations. In Singapore, the office rental rates vary depending on the location. Under normal circumstances, offices in the central business district (CBD) command the highest rates.
It is advisable to source for office space via a local real estate agent, who can provide better expertise and advice on rental decisions with a fee.
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The process for incorporating a business is mostly similar for locals and foreigners. For the foreigner, there may be additional steps like the appointment of a local authorised representative or applying for the relevant passes if they would like to manage the business in Singapore personally.
It is advisable to engage a corporate secretarial firm to help you with the company incorporation. Your corporate secretary can also assist with the various applications after your company have been successfully registered.
Do not hesitate to get in touch with us should you have any questions.
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