Are you interested in starting a business in Singapore? If YES, here is a complete guide plus legal requirement to starting a business in Singapore as a foreigner.
Okay, having provided an in-depth analysis of the top 50 best small business ideas in Singapore and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in Singapore. So put on your entrepreneurial hat and let’s proceed.
Why Start a Business in Singapore?
The country is officially known as the Republic of Singapore, and often referred to as the Lion City, the Garden City, and the Red Dot is a global city and sovereign state in Southeast Asia and the world’s only island city-state. It lies one degree (137 km) north of the equator, at the southernmost tip of continental Asia and peninsular Malaysia, with Indonesia’s Riau Islands to the south.
Singapore’s territory consists of the diamond-shaped main island and 62 islets. Since independence, extensive land reclamation has increased its total size by 23% (130 km2), and its greening policy has covered the densely populated island with tropical flora, parks, and gardens.
The economy is diversified, with its top contributors – financial services, manufacturing, oil-refining. Its main exports are refined petroleum, integrated circuits, and computers which constituted 27% of the country’s GDP in 2010 and includes significant electronics, petroleum refining, chemicals, mechanical engineering and biomedical sciences sectors. In 2006, Singapore produced about 10% of the world’s foundry wafer output.
If you’re looking for a healthy environment which is especially good for sustaining a start-up business, then Singapore is your one-stop destination. In fact, there is scope for all kinds of businesses to flourish here. Read on to know more about the most successful and lucrative business options that you can start in Singapore.
Starting a Business in Singapore as a Foreigner – A Complete Guide
- General Overview
Singapore has a highly developed market economy, based historically on extended entrepôt trade. Along with Hong Kong, South Korea, and Taiwan, Singapore is one of the original Four Asian Tigers but has surpassed its peers regarding GDP per capita. The Singaporean economy is known as one of the freest, most innovative, most competitive, most dynamic and most business-friendly.
The 2015 Index of Economic Freedom ranks Singapore as the second freest economy in the world. According to the Corruption Perceptions Index, Singapore is consistently ranked as one of the least corrupt countries in the world, along with New Zealand and the Scandinavian countries.
Singapore has the world’s eleventh largest foreign reserves and one of the highest net international investment position per capita. The currency of Singapore is the Singapore dollar (SGD or S$), issued by the Monetary Authority of Singapore (MAS).
It is interchangeable with the Brunei dollar at par value since 1967, owing to their historically close relations. MAS manages its monetary policy by allowing the Singapore dollar exchange rate to rise or fall within an undisclosed trading band. Facebook co- Secrecy Index of the world’s top tax havens, scoring narrowly ahead of the United States.
Singapore has the world’s highest percentage of millionaires, with one out of every six households having at least one million US dollars in disposable wealth. This excludes property, businesses, and luxury goods, which if included would increase the number of millionaires, especially as property in Singapore is among the world’s most expensive. Singapore does not have a minimum wage, believing that it would lower its competitiveness. It also has one of the highest income inequalities among developed countries.
Facts and Figures of Singapore That Will Interest You as an Investor/Entrepreneur
There are loads of facts and figures that make Singapore a place to invest. It is no wonder that people throng Singapore to do one form of business or the other there. This is because of the vast minds and resources that the country possesses. Here are some real facts that you might find handy;
- Singapore has strong international trading links, as its port is one of the world’s busiest regarding tonnage handled.
- Singapore is a global commerce, finance, and transport hub.
- For ten consecutive years, it was regarded as the easiest place to do business by the World Bank.
- The World Economic Forum (WEF) also considered the country as the most technology ready country.
- The WEF also viewed it as the 2nd most competitive country in the world.
- It is also the 3rd-largest foreign exchange center.
- Singapore is the 3rd-largest financial center in the world.
- The country possesses the 3rd-largest oil refining and trading center.
- It also has one of the top two busiest container ports since the 1990s.
- For the past decade, it has been the only Asian country with the top AAA sovereign rating from all the leading credit rating agencies, including S&P, Moody’s and Fitch.
- Singapore is Asia’s most influential city and 4th in the world by Forbes.
Factors or Incentives Encouraging Investors to Venture into Business in Singapore
It is the wish of investors to rip when they sow, as such it would be really vital that the country to be invested in has a highly fertile ground that can cause a yield on returns. Several incentives attract investors in Singapore. Here are some of the benefits of investing;
- Strong Economy based on GDP.
- Zero tolerance for corruption.
- Open market Economy.
- Stable Prices.
- Vibrant Transportation.
- Singapore has a highly developed and successful free-market economy.
- Skilled Manpower and workforce.
- Low tax rates.
- Advanced infrastructure.
- The Singaporean economy is known as one of the freest, most innovative, most competitive, most dynamic and most business-friendly.
Starting a Business in Singapore – Market Feasibility Research
For the past decade, Singapore has been the only Asian country to receive top-tier AAA sovereign ratings from all the main credit rating agencies, including Standard & Poor’s, Moody’s, Fitch. Globally, it is one of only nine countries with an AAA rating from the Big Three (credit rating agencies).
Singapore attracts a large amount of foreign investment as a result of its location, skilled workforce, low tax rates, advanced infrastructure and zero-tolerance against corruption. There are more than 7,000 multinational corporations from the United States, Japan, and Europe in Singapore. There are also approximately 1,500 companies from China and a similar number from India. Foreign firms are found in almost all sectors of the country’s economy.
Singapore is also the second-largest foreign investor in India. Roughly 44 percent of the Singaporean workforce is made up of non-Singaporeans. Over ten free-trade agreements have been signed with other countries and regions. Despite market freedom, Singapore’s government operations have a significant stake in the economy, contributing 22% of the GDP.
Singapore is considered a barometer of global economic health, especially within Asia, owing to its high dependence on external trade. Its foreign trade and capital flows is 407.9% of its GDP, making it the most trade dependent country in the world. It is the 14th largest exporter and the 15th largest importer in the world.
List of 10 Well-Known Foreign Brands Doing Business in Singapore
Over the years, several brands have gone from being small to becoming household names. One of the good things about these brands is that they are foreign. Here is a list of 10 well-known foreign brands in Singapore;
- General Electric
List of 10 Well Known Indigenous Businesses in Singapore
- Chin Han
- Creative Technology
- Skinny Pizza
- Thai Express
List of 10 Most Popular Indigenous Entrepreneurs in Singapore
- Razer-Tan Min-Liang
- Banyan Tree- Ho Kwon Ping
- Axe oil- Leung Kai Fook
- X-Mini – Xmi Pte Ltd.
- OSIM -Ron Sim
- Thai Express
- BreadTalk- George Quek
- Charles and Keith
Top 5 Best Cities to Do Business in Singapore
While it is okay to do business generally in the Singapore, there are however some towns and states that have an edge over others because of the very favorable conditions they offer. Different companies have gone ahead to be bornhere, and they have birthed other businesses as well. Here is a list of top 5 best cities to do business in Singapore;
- Bukit Batok
When looking to start a business in the Singapore, a whole lot has to be looked at from the economic point of view. Some of the factors in consideration include the following; Human Capacity Building and Job Creation, Social policies and corporate social responsibility initiatives, Infrastructure improvements, Technology and knowledge transfer.
Did you know that Singapore also offers an extremely business-friendly environment to foreign investors? In fact, it has recently been adjudged the best-value city for foreign businesses.
All the factors that are conducive to starting and running a new business such as a strong forex market, free market economy, financial stability, robust legal and regulatory framework, advanced and efficient infrastructure, a corruption-free system, strategic geographical advantages and skilled manpower are easily available which make it a very attractive investment hub.
Top international firms like Apple, Google, Credit Suisse, DBS Bank, Procter and Gamble, Microsoft, et al have already acknowledged the potential in Singapore and have set up successfully running businesses here. There is also immense scope for business entertainment, which Singapore considers a crucial part of promoting foreign investment.
Possible Threats and Challenges You Will Face When Starting a Business in Singapore
- Huge taxation
- Language Barrier
- Dis-Jointed cities
Starting a Business in Singapore as a Foreigner – Legal Aspect
- Business Licenses and Permits You Needed to Start a Business in Singapore
For you to start a business in Singapore, you will need federal and state business permits and licenses. However, there are basic and most common licenses and permits that all businesses need. Without these licenses, you risk being clamped down on by the authorities involved in the execution of trade laws in Singapore. They include the following;
You can easily register your business, including foreign branch offices, online at Bizfile by the Accounting and Corporate Regulatory Authority. Foreign businesses that wish to set up a representative office in Singapore may approach these government agencies:
- Banking, finance and insurance – Monetary Authority of Singapore.
- Legal – Legal Services Regulatory Authority.
- All other industries – International Enterprise Singapore.
The Best Legal Entity to Use in Singapore
- Sole proprietorship
This is a business structure owned by your spouse who has full authority in her own name and owns all the assets. However, she also will owe and answer personally to all liabilities or suffer all losses, but enjoys all the profits. It is easy to form and simple to register with the government.
This is a business structure owned by two or more partners. One with more than less than 1000 dollars capital has to register with the Securities and Exchange Commission. All the partners have unlimited personal liability for the affairs of the business. There is no benefit to you as a foreigner with this form of ownership by your spouse.
This is the preferred form of ownership if the business is going to be anything larger than a small hobby type business. For a small business, you are best off just being in a sole proprietorship – due to the low cost and ease of formation and its relative freedom from regulation by the government.
However, for a business of any significance (a real estate ownership business, a franchise, a significant manufacturing or export business, etc.), this is definitely the preferred form of ownership, and you as the foreigner can retain up to 40% ownership.
List of Legal Documents You Need to Run a Business in Singapore
Several documents must be in place to run a business in Singapore. The inability to have all or more of these documents in place means that you just might be found wanting along the line. As such, here are some of the documents that you will be needing;
- Certificate of Incorporation
- Repossession Clearance Certificate
- Business License
- Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company Bylaws
- Operating Agreement for LLCs
- Insurance Policies
List of Government Agencies and Parastatals that are In-charge of Registering businesses and Issuing Licenses and Permits in Singapore.
Depending on the business that you wish to operate, business permits or licenses may be required to conduct a specific type of business. Your registered company may have to apply for business permits or licenses if you are in these trades: Professional services such as doctors, lawyers, accountants, pilots, commodity future traders need an occupational license. Others are private schools, travel agencies, childcare centers, foreign worker employment agencies; spas need to apply for a Compulsory License for operating the business.
In different countries of the world, there are various licensing bodies. Singapore is not an exception as it has its agencies that are saddled with the affairs of business permits and licensing. They see to it that before a business fully commences trade, they have to be well licensed.
All businesses must be registered with the Accounting & Corporate Regulatory Authority (ACRA). This includes any individual, firm or corporation that carries out business for a foreign company.
A foreign company that wants to set up a branch for its business in Singapore will need to appoint two local agents to act on its behalf. These agents must be Singapore residents, that is, either citizens or permanent residents, or foreigners with employment or dependant passes. Information on registering a branch of a foreign company is available here.
Special licenses are needed for some businesses such as banking, insurance and stockbroking. Special licenses are also required for the manufacture of goods such as cigars and firecrackers’ step-by-step guide to registering a business or company in Singapore is provided at the business .gov.sg website.