How Can Foreigners Start a Business in Singapore?
As one of the most business-friendly countries in the world, it is relatively easy for eligible foreigners to set up a business in Singapore. This guide aims to help foreigners understand what is involved in setting up a business in Singapore.
Table of Contents
Types of Business Legal Structures Available to Foreigners
To begin, a foreigner should choose what legal structure he wishes for the business to take. Singapore law recognises a variety of legal structures such as the sole proprietorship, partnership and company.
Each structure has its own advantages and disadvantages, and special requirements may apply if the foreigner will not be physically present in Singapore to set up or run the business. All these will be summarised below.
A sole proprietorship is a business owned and run by a single person. It is the simplest and least costly of all business structures to set up and maintain.
Sole proprietors receive all the profits from the business and have very few compliance or reporting requirements compared to companies. However, they are also personally liable for all debts incurred by the business and any legal action taken against it.
Registration of a sole proprietorship is done online through the BizFile+ portal using SingPass. If you do not have a SingPass, you will have to engage the services of a registered filing agent such as a corporate services firm to fill in the application for you.
Generally, a foreigner does not need to be physically present in Singapore to register a sole proprietorship.
However, if the sole proprietor does not reside in Singapore, he or she must appoint an authorised representative who is ordinarily resident in Singapore (potential representatives include Singapore citizens, Permanent Residents and EntrePass holders).
This authorised representative is appointed for the reason of receiving notices on behalf of the company and to undertake responsibility for all Singapore operations.
A partnership is a business owned by a minimum of 2, and a maximum of 20, partners. Similar to a sole proprietorship, partnerships are easy and less costly to set up, with fewer compliance or reporting requirements compared to companies.
However, partners are also personally liable for the debts of the partnership (including those incurred by other partners) and legal action taken against it. This necessitates a high degree of trust between partners and the need for a cohesive partnership agreement.
Registration of partnerships is similar to the process of registering a sole proprietorship. This includes engaging a filing agent and/or appointing an authorised representative, if applicable. A partnership can also be registered without any of the partners being physically present in Singapore.
You may wish to refer to our guide on forming a partnership for more information.
Unlike the sole proprietorship and partnership, incorporating a company is relatively more time-consuming but confers the advantage of limited liability.
A company is treated as a separate legal entity from its shareholders, which means that they are not personally liable for any debts or legal action taken against the company.
However, companies are subject to more compliance requirements (such as filing of annual returns and holding of annual general meetings) and may also take longer to be wound up (it can take 5 months for a company to be removed from the register, compared to a few minutes for partnerships and sole proprietorships).
There are 2 main situations involving incorporation of companies by foreigners:
- Foreigners seeking to personally set up a local company in Singapore; and
- Foreign companies wishing to set up in Singapore.
Foreigners Seeking to Set Up a Local Company in Singapore
Foreigners may incorporate a company online through the BizFile+ portal using their SingPass account.
However, all companies must have at least 1 director who is ordinarily resident in Singapore. This means that a foreigner must appoint such a person as director if he himself does not reside in Singapore and does not intend to do so.
That said, if the foreigner wishes to come to Singapore to manage the business himself, he can have the newly incorporated company apply for an Employment Pass from the Ministry of Manpower (MOM) on his behalf. For a higher Employment Pass application success rate, the company should have a minimum of S$50,000 in paid-up capital and should also fulfil certain other requirements.
To better understand your chances at succeeding in obtaining an Employment Pass, we recommend using the MOM’s Self-Assessment Tool which allows applicants to check if they qualify for an Employment Pass.
You may wish to refer to our guide on Singapore company registration for more information.
Foreign Companies Wishing to Set Up in Singapore
In the event that a foreign company (rather than an individual) wishes to set up in Singapore, they have 4 entry options available to them – a branch office, a subsidiary, a representative office and redomiciliation.
Each entry option has its pros and cons, as well as various points to consider such as tax exemptions and extent of liability. Hence, foreign companies looking to set up in Singapore will have to take these into account before deciding which is the best entry option to go with.
You may wish to refer to our guide on how foreign companies can set up in Singapore for a more detailed explanation on this topic.
Are Foreigners in Singapore on Certain Passes Allowed to Start a Business in Singapore?
While Singapore generally allows foreigners to set up businesses in Singapore, foreigners who are already in Singapore under a certain pass may be restricted from starting businesses by the terms of that pass (see table below).
Generally, most passes (e.g. Employment Passes or Work Permits) do not entitle their holders to manage businesses in Singapore. This means that such pass-holders cannot set up sole proprietorships or partnerships in Singapore.
They may still set up and own shares in companies provided that they do not register themselves as a director of that company. However, the pass-holder will not be able to apply to work for a company that they hold shares in.
The situation is a bit different for holders of a Dependant’s Pass or a Long-Term Visit Pass.
If a holder of a Dependant’s Pass wants to run a business in Singapore, they may:
- First register a sole proprietorship, partnership or company. If they register a company, they will need to own at least 30% of the shares in the company; and then
- Apply to MOM for a Letter of Consent to run the business.
If a holder of a Long-Term Visit Pass wants to run a business in Singapore, they may:
- Register a company, listing someone who is ordinarily resident in Singapore (such as a Singapore citizen or Permanent Resident) as the company’s director. The pass-holder should not be either a director or a shareholder of the company at the time of company registration; and then
- Get the Singapore company to apply on their behalf for a Letter of Consent from MOM allowing them to work for that company. (This Letter of Consent is different from the one that Dependant’s Pass holders need to run a business in Singapore.)
Holders of the EntrePass have the most flexibility when it comes to starting a business in Singapore.
The EntrePass scheme is designed for eligible foreign entrepreneurs who wish to start and operate a new business in Singapore. EntrePass holders are granted a wide range of benefits – they are entitled to set up a business with the legal structure of their choice (sole proprietorship, partnership or company) as well as the right to bring their spouse and children to Singapore by applying for Dependant’s Passes for them.
In due course, EntrePass holders may also become eligible for permanent residence in Singapore. It is therefore a good idea for any foreigner who wishes to start a business in Singapore and who satisfies the eligibility requirements to consider applying for an EntrePass from MOM.
You may wish to refer to our guide on EntrePass application for more information.
The following table shows the various types of passes and the types of legal structures that foreigners holding such passes can register for their business in Singapore:
|Type of Pass||Sole Proprietorship||Partnership||Company|
||Not allowed||Not allowed||Pass-holders are allowed to incorporate and own shares in a company, but not allowed to work as a director or employee of it|
||Not allowed||Not allowed||Pass-holders are allowed to incorporate and own shares in a company. However, pass-holders who want to work in a company (as either a director or employee) will need to incorporate a company of which they are neither a director nor a shareholder, and then have the company apply for a Letter of Consent from MOM|
||Allowed, but pass-holder must apply for a Letter of Consent||Allowed, but pass-holder must apply for a Letter of Consent||Allowed, but pass-holder must own at least 30% of the shares in the company and also apply for a Letter of Consent|
Can Foreigners in Singapore Run a Business From Their Homes?
The Singapore government allows foreigners who wish to run a small business from their Singapore homes (such as a home bakery) to do so under the Home-Based Small Scale Business Scheme, subject to the terms of their passes.
In practice, this means that only EntrePass holders, Dependant’s Pass holders or Long-Term Visit Pass pass-holders with a Letter of Consent from MOM, may run businesses from their Singapore homes (as explained above).
In addition, it must be noted that such businesses must respect the residential nature of the property and must thus observe certain guidelines. These include:
- The home business must not employ any persons outside of the household.
- The home business must not display paid or physical advertisements (business signboards etc.)
- The home business must not introduce increased human or vehicle traffic to the site.
- The home business must not introduce noise, smoke, smell, effluent or dust nuisances / danger to the surrounding residents.
- There must be no loading or unloading of goods by vans or trucks.
- The activities of the home business must comply with the relevant rules and regulations (i.e. food and hygiene laws, fire safety requirements).
Furthermore, it should be noted that addresses of HDB flats, unlike those of private properties, cannot be registered as a business address (with the exception of businesses in specific industries, under the Home Office Scheme).
Since registration of businesses (sole proprietorship, partnership and company) requires a valid business address, eligible foreigners who wish to run a small business from their HDB flats must make the necessary arrangements and designate a different property as the business address instead. This is often done by obtaining the services of a corporate services firm offering virtual business addresses in Singapore.
Next Steps After Registering a Business in Singapore
Registering a business is only the first step in the setting up of a business. With that formality taken care of, the actual creation and management of a business can begin.
Note that the following actions may not be possible if you are on a pass in Singapore, and that pass does not allow you to be a director or a direct employer of a company.
Opening a corporate bank account
Generally, one of the first things to be done after registration is the opening of a corporate bank account for the business. This allows the foreigner to separate his personal and business expenses for accounting purposes (and in the case of companies, allows for business liability to be limited to the company’s assets).
The company will need to be incorporated before the bank will provide an appointment for the opening of the bank account.
Most banks in Singapore also require the company’s directors to be physically present to open an account, though some banks also allow account verification to be done remotely via phone or video conferencing on a case-by-case basis.
If company directors need to be physically present to open the bank account, they are advised not to book their trip to Singapore before the appointment with the bank has been confirmed.
You may wish to refer to our article on opening of corporate bank accounts in Singapore for more information.
Hiring of employees
In most cases, the business may also require the hiring of employees to take on various corporate functions.
Singapore has a highly-skilled workforce to meet the demands of most international firms, with local job websites being popular recruitment avenues for employers. However, it is also possible to bring in employees from overseas by applying for the relevant work pass from MOM.
For more information (as well as the relevant compliance requirements), you may wish to refer to our article on hiring employees in Singapore.
Renting office space
Most non-home-based businesses may also need to rent office or business premises for their operations. Office rental rates in Singapore vary depending on the location of the property, with properties in the central business district generally being the most expensive.
It is possible to source for office space via local property sites or by inquiring with a local real estate agent who can usually provide greater expertise on rental decisions at highly competitive rates.
This article has described the various considerations which a foreigner should take into account when starting a business in Singapore.
The process for starting a business is largely similar for locals and foreigners, with a few additional steps for foreigners such as appointing a local authorised representative or applying for an EntrePass, Employment Pass or Letter of Consent (as relevant) if they wish to manage the business in Singapore themselves.
It can be helpful to engage the services of a corporate services firm to assist with the business registration and various application processes before and after the business has been successfully registered in Singapore.
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