Register your business in Singapore - Options for foreigners
There are many types of business entities in Singapore. These range from simple sole proprietorship to a listed public limited company. However some forms of business entities are only available to local residents. As a foreigner you can not register a sole proprietorship or a partnership. Limited liability partnership can be registered but with some constraints.
The most common option for foreigners is to incorporate a private limited company. Within private limited company category there are 4 options as explained below.
Independent limited liability company
You as a foreigner can incorporate a company in Singapore and subscribe to the shares in your individual name. You can be the sole shareholder or shareholding can be with few people who are your relatives, friends or business associated.
Most of the small business enterprises registered in Singapore are of this type. If you are taking an entrepreneurial route, this business entity is the perfect vehicle. Private limited companies have many benefits. The shareholders and the company have independent existence, and the owner’s liability is limited to the amount of capital in¬vested. By a simple transfer of shares, ownership in the company can be passed between shareholders. If your company transacts less than 5 million dollars in sales, it is exempt from auditing.
Subsidiary private limited company
A foreign company may incorporate a company in Singapore by taking shareholding in Singapore entity. In that case it will be called a subsidiary private limited company. Like in above case shareholders and the company have independent existence, and the owner’s liability is limited to the amount of capital in¬vested. By a simple transfer of shares, ownership in the company can be passed between shareholders. However audit exemption is not available for subsidiary private limited companies.
Singapore branch office
Singapore branch office is a special type of company which is actually an extension of foreign company in Singapore. As such a branch office is not considered independent from its parent. The liability of branch office extends to the parent entity.
The parent company's balance sheet must be lodged with ACRA within two months from the date of its annual general meeting. For large foreign corporates this option can be beneficial in some specific circumstances.
Representative office is like a temporary admin office which a foreign company establishes to do market research, admin support for large project etc. A rep office is not allowed to book sales. The registration for representative office is valid for 3 years, and it lapses if not renewed.
In this case majority of the shareholding in Singapore entity is taken up by the parent company. Circumstances where this is necessary are;
1. Parent company is publicly listed and has thousands of shareholders
2. Parent company is not a public company but has many shareholders and getting all those shareholders together for forming a Singapore entity is not practical
3. For specific licensing requirements, this might be necessary
In general many medium to large size businesses will follow this route for Singapore company incorporation.
Let’s say you are into business of manufacturing aircraft engines. You are now thinking of establishing a service centre based in Singapore to provide maintenance services to regional airlines which are using your engines. This is a very responsible job and clients are interested in ensuring that the maintenance is done with utmost care.
You may decide to register your Singapore service centre as a subsidiary company , however since the liability of this company does not extend to parent company, trust of clients may be difficult to gain.
When you register your Singapore entity as a branch office , you are basically conveying a message to your valued clients, that the Singapore operations is 100% part of your main business and liability of anything that is done by Singapore branch office will extend to headquarters.
Lets say you are into business of oil industry upstream project consultancy. Your company has got a big consultancy project from Shell and the duration of the project is 2 years. During this period many of your consultants will be deployed in south Asia region. While the consultants will visit work location directly from home country, you still need a small support office to manage all this logistics.
You could register a subsidiary company in Singapore. However it will have its legal reporting requirements, maybe audit requirements, a need to have nominee director and so on. Moreover after the completion of project this company will need to be liquidated.
Instead a representative office setup can be very useful. It does not need any nominee director, there are no reporting or audit requirements and if you do not initiate renewal after 3 years it will automatically cease to exist.
Below table summarises key differences in these four types of entities
|Independent Private company||Subsidiary private company||Branch office||Representative office|
|Entity type||Independent company owned by individuals||Independent company owned by foreign parent company||Extension of parent entity||Temporary admin office|
|Liabilities||Limited liability||Limited liability||Liability extend to parent company||Liability extend to parent company|
|Entity Name||Can be as per your choice||Can be different from parent entity||Must be same as parent organisation||Must be same as parent organisation|
|Activities||Can be different from parent company||Can be different from parent company||Must be same as parent company||Only administrative, market research and similar activities are allowed. Sales is not allowed.|
|Life of entity||Valid forever till liquidated||Valid forever till liquidated||Valid forever till liquidated||3 years at a time|
|Tax liability||Usually taxed as a resident entity unless specific reasons exist to tax as non resident entity||Usually taxed as a resident entity unless specific reasons exist to tax as non resident entity||Being a branch office its taxed as a non resident entity||No tax liabilty as no sales allowed|
|Audit and annual reporting||No need to file accounts if company is solvent||Filing of accounts required only for subsidiary company||Must file audited accounts + Parent company’s audited accounts also needs to be filed||Not applicable|
|Restriction on hiring employees||No restriction on local hiring||No restriction on local hiring||No restriction on local hiring||Can hire max 5 employees + Chief representative must be from foreign company|
|Local Director requirement||Need atleast one resident director||Need atleast one resident director||Need minimum two resident agent||Needs one Chief representative from parent company. No local director or agent requirement|