What you need to know when expanding your startup to Singapore

The Tech Startup’s Guide to Singapore is a series where we bring you useful tips such as the who, what, and how of running a startup in Singapore.

Often regarded as a stepping stone to Southeast Asia expansion, Singapore has a mature pro-startup environment that is expected to grow. Singapore is also ranked as one of the best countries in the world for doing business, as its rational tax system features low tax rates and an extensive network of Avoidance of Double Taxation Agreements (DTAs) with over 50 countries.

With strong infrastructure and an efficient process for incorporating and running a new company, it is no wonder that many international companies such as Qualtrics, Flipkart and Grofers have expanded into Singapore.

Government initiatives to help startups

To help foreign startups establish their presence locally, the Singapore government has set aside approximately US$153 million under the Startup SG Equity scheme to encourage both public and private co-investment for deep-tech startups.

In addition, the ACE International Centre helps local startups expand overseas by providing resources and advice. In 2017, four in five Singapore firms ventured overseas. It will also help foreign and global startups find investment, technology and business opportunities in Singapore by leveraging on local networks.

On top of all these support, a wide range of startup grants, equity financing, and funding are available to help startups through various early stages of expansion.

There are also angel investing networks, venture capital firms, startup incubators and even accelerator programs to help businesses raise the capital they need – these will be covered in greater detail in our next startup guide feature, so do keep a lookout!

Types of business entities in Singapore

With such a strong national push towards entrepreneurship, it is not surprising that Singapore has a wide variety of business entities available for foreign startups. The following are the main business entity types in the country:

Limited Liability Company

A Limited Liability Company (LLC) is a company limited by shares, such that its liabilities are limited to the amount of share capital. LLC is a separate legal entity from its members, and the liabilities of the owners are limited to the assets in the company. Personal assets are separate and protected from business liabilities.

A LLC can be of the following types:

• Private Limited Company

Refers to a business which shares are held by fewer than 50 people and not available on the stock exchange to the public. It has its own legal identity, separate from its shareholders and its directors. This means it can acquire assets, go into debt, enter into contracts, sue or be sued, all in its own name.

• Public Limited Company

A public limited company is usually listed on stock exchange, and has at least 50 shareholders. It is also able to raise funds from the public – which also leads to it being subject to stricter regulations.

A private limited company is the most preferred type of business entity for entrepreneurs, due to reasons such as its separate legal entity and limited liability.

Foreign company registration options

For foreign companies who wish to expand to Singapore, below are three main options available:

• Subsidiary Company

It is owned or controlled by their parent company or holding company. It is usually preferred as the parent company can isolate risks since they are recognized as two separate legal entities.

• Branch Office

An extension of its parent company, and is not a separate incorporated entity. Thus, liabilities extend to its parent company, which can be risky.

• Representative Office

A temporary arrangement for conducting market research activities, it does not have any legal status and cannot engage in profit yielding activities.

Partnerships

A partnership business structure allows two or more people to co-own a business. This attempts to address the limited-expansion constraint faced by a sole proprietorship. Under partnerships, businesses can choose to be in either of the three types listed below:

• General Partnership

Similar to sole proprietorship, partners are personally liable for the debts of the business, and each partner can be held accountable for the actions of another partner.

• Limited Partnership

The liabilities of limited partners are limited to their investments in the partnership, be it in capital or property. The downside is that partners in a limited partnership are unable to participate in the management of the business.

• Limited Liability Partnership

A limited liability partnership (LLP) is most popular as it allows the business to enjoy the benefits of a private limited company while being in a partnership. It is important to note that LLPs are for businesses carrying a profession, such as that of accountants and law firms, as opposed to a trade. For more information, check out the registration guide for LLP.

Sole Proprietorship is another option – while arguably the simplest business entity, it exposes the owner to the highest personal risk due to the unlimited liability.

Photo credit: Pexels

Foreign company registration process

Registration is one of the biggest obstacles faced by companies trying to do business in a foreign country. Thankfully, Singapore is one of the most transparent and efficient countries when it comes to foreign company registrations.

Generally, the application will be processed within 15 minutes after the name application fee (US$11) has been paid. It can, however, take anywhere between two weeks to two months if the application needs to be referred to another agency for approval or review. ACRA’s website is a great resource to find out more about registering your company in Singapore. Note that newly registered branches of foreign companies can receive a free business profile report to better assess your company.

Additionally, there is a common misconception that foreign investors need to invest US$38,000 to register their businesses in Singapore. The minimum amount depends on which scheme you are under – the Singapore Entrepreneur Pass scheme or the Singapore Employment Pass scheme. The latter only requires a paid-up capital of US$0.80 during company registration.

Connect with local players at TIA Singapore 2018

If you are an international startup keen on expanding your business in Singapore, look no further than this May 15 & 16, at Tech in Asia Singapore 2018, where over 5,000 attendees and senior decision makers will be gathering under one roof. Plus, look forward to 250 unique startups exhibiting their products at Startup Factory. This is the best time to learn about the local ecosystem, what makes them tick, and potentially connect or collaborate with local businesses.

Tickets are now going at 15 percent off (code: tiasg15), till 15 April – grab your discounted tickets simply by clicking on the button below.

Converted from Singapore Dollar. Rate: US$1 = SGD 1.32