Singapore, famously known as “The Little Red Dot” or “The Lion City” has established itself as a reputable financial and regional trading centre. Being one of the busiest ports and location for investments in the APAC region, multinational organisations and financial institutions worldwide have chosen Singapore as their base for their business.
Singapore is regarded as an ideal location for companies to grow their business and as a stepping stone to enter the other emerging markets in Asia. Factors such as its strategic location within APAC, pro-business environment, a competitive workforce, progressive economic policies, strong currency and infrastructure have enabled Singapore to be the ideal choice within APAC to set up an overseas corporation.
Singapore is one of the friendliest countries globally, just like a local Singaporean, foreigners can set up a business in Singapore and own its 100% shareholding. The only condition is that foreign firms must appoint a regional director. They need to engage a filing agent to register their company because foreigners are not allowed to register their own companies in Singapore.
Type of Business Entities available for foreigners in Singapore
- Sole Proprietorship
A sole proprietorship is a structure in Singapore where a singular person owns the business. It is one of the easiest and simplest way of setting up and maintaining a business entity in Singapore.
Sole proprietors, comparing to companies, will have fewer compliances or reporting requirements to follow and will receive full profits from the business. However, they will be personally liable to all debts that are incurred by the company, and legal actions can be taken against them.
To register for a sole proprietorship in Singapore, a foreigner does not need to be physically in Singapore. They must appoint an authorised representative in Singapore who is a Singapore citizen, Permanent Resident or EntrePass Holder in Singapore.
The authorised representative is only appointed to receiving notices on behalf of the company and undertake any responsibilities for all operations in Singapore. But they will not be subjected to any legal actions or liabilities filed against them.
- Limited Liability Partnership (LLP)
A partnership is a structure whereby the business is owned by a minimum of 2 and maximum of 20 partners. Resembling Sole Proprietorship, LLP has an easy and straightforward way of setting up and maintaining with manageable compliance or reporting requirements compared to companies.
In partnership, partners in the company are legally liable for any debts and legal actions of the partnership, which includes those that might be incurred by other partners. Therefore, a high risk will be involved, and a certain degree of trust will be necessary for the partnership agreement.
Registering for partnership is similar to a sole proprietorship. A foreigner does not need to be physically present in Singapore but is required to appoint a local manager who is a resident in Singapore, either a Singapore citizen, Permanent Resident or EntrePass Holder.
- Private Limited Companies
Private Limited (Pte Ltd) companies are the most common business entities set up in Singapore. Unlike sole proprietorship and LLP, the formation for private limited firms is more time-consuming. It is subjected to more stringent requirements such as the filing for annual returns and holding annual general meetings.
Private limited companies are treated as a separate legal entity from its shareholders; therefore, shareholders listed in the companies will be not liable to any debts or legal actions taken against the company.
A company can register up from 1 or up to 50 shareholders, but they will require at least one local director, either a Singapore citizen or Permanent Resident. Private limited firms also limit the liability of its shareholders to the number of shares they invested.
Suppose the company has intentions for a foreigner to reside in Singapore and manage the business. In that case, they may use the newly incorporated entity to apply for an Employment Pass (EP) for the foreign employee to work in Singapore. A minimum of SGD50,000 will be required as paid-in capital together with other certain requirements fulfilled to enable an easier process with the Employment Pass.
Foreign Companies incorporating in Singapore
For foreign companies that are deliberating an expansion to Singapore, there are a few options. Businesses can either open a subsidiary company, a branch office, or a representative office.
- A form of limited liability company
- The company can be a separate entity from its parent company
- The parent company can own 100% of its shares in Singapore
- Parent company’s asset is not liable to pay any debts or losses of the subsidiary in Singapore
- The parent company’s liabilities are limited to only its share capital.
- Most foreign multinational organisations will prefer to open a branch office
- The branch office will have the same name as the foreign entity
- It is an extension of its parent company
- The parent company will be entitled to generate profits within Singapore as well as holding properties in Singapore
- Branch office helps to leverage the foreign company’s brand to obtain and tender more contracts and financial opportunities in Singapore.
- Representative Offices are usually set up to research potential business opportunities in Singapore
- It will not be required to have any substantial financial investments
- It will not be allowed to any profit-making activities
- It will be able to conduct non-commercial activities to assess prospects in Singapore
- It will not be allowed to appoint more than 5 employees
- Representative Office does not have a separate entity to the parent company, and parent company needs to be established for more than 3 years with an annual turnover of more than SGD 250,000.
- In the case of insolvency of the foreign parent company, the representative office will be de-register.
Registering a company in Singapore as a foreigner can be relatively simple, with most of the compliance and requirements easy to follow. With that in mind and the information above, one must note that engaging a registered filing agent’s services will be required if you are a foreigner looking to set up a company in Singapore. Besides, it is best to consult consultants experienced in the local landscape to choose the best-suited entity for your business and ensure the company incorporation process is hassle-free.
At Desfran, our team of expert consultants is here to provide you with our professional expertise regarding company incorporation. Led by one of the world’s leading management teams, our experts draw on their wealth of knowledge to offer comprehensive management advice. We are aware of the latest developments and trends in the financial markets and are equipped to guide you to expand your business.
Contact Desfran for a consultation today!