Doing Business in Singapore
For many years, the business world has regarded Singapore as a stable, thriving and efficient entry point into the Asian market. Singapore’s strategic location at the crossroads of East and West has positioned the city-state as a major global business hub, and with its robust economy and strong talent pool, Singapore offers businesses the ideal landscape to invest with confidence.
Reasons for doing business in Singapore
The World Bank Doing Business Report 2020 ranks Singapore first globally in the contract enforcement variable. This measures the efficiency of a judicial system in resolving a commercial dispute.
- Based on the study, resolving a commercial dispute through the Singapore Courts takes just 164 days, the shortest time recorded worldwide – under half the time in New York, and about a third the time in London.
- Costs are comparable to that of New York, and are about half of what it would cost in London.
According to the latest survey by survey by Queen Mary University of London and White & Case, Singapore has been identified as one of the two most preferred seats of arbitration in the world, together with London. Singapore is among the top 4 most preferred seats of arbitration across all regions – Africa, South America, the Americas, and so on. SIAC is also the 2nd most preferred arbitral institution in the world, after ICC. It is again among the top 4 arbitral institutions in all regions. This shows that Singapore is accepted by parties around the world.
Types of local entity structures
Sole Proprietorship
A sole proprietorship is a business owned by one person or one company.The sole proprietor has absolute say, but also unlimited liability, in the running of the business.
Partnership
A partnership is a business formed by at least two, or a maximum of 20, partners.Partners have unlimited liability, and will be personally liable for the partnership’s debts and losses incurred by other partners. Partners can also sue or be sued in the firm’s name, and cannot own property in the firm’s name.
Company
A company is a business entity registered under the Companies Act, Chapter 50. It has a legal personality (i.e. the rights to own properties, perpetual succession,and can sue or be sued in its own name). In contrast to sole proprietorships and partnerships, members of a company are not personally liable for debts and losses of a company. Companies tend to have higher set-up and maintenancecosts. Annual returns must also be filed. There are three types of companies:
Exempt Private Company - 20 members or less and no corporation holds beneficial interest in the company’s shares. Private Company - 50 members or less. Public Company - more than 50 members.
Limited liability partnership
A Limited Liability Partnership (LLP) gives owners the flexibility of operating as a partnership, while having a separate legal identity like that of a private limited company. Since the LLP has a legal personality separate from its partners, the partners of the LLP will not be held personally liable for any business debts incurred by the LLP. Registration costs are lower than that of a company, and there are fewer formalities and procedures to comply with. However, an LLP still needs to keep accounting records, profit and loss accounts, and balance sheets that sufficiently explain its transactions and financial position.
Limited partnership
A Limited Partnership (LP) consists of a minimum of two partners, with at least one general partner and at least one limited partner. In contrast to an LLP, an LP
does not have a separate legal personality from its partners. While an individual or a corporation may be a general partner or a limited partner of the LP, the
general partner will be responsible for the actions of the LP and is liable for all its debts and obligations. The limited partner will not be liable for the LP’s debts and obligations beyond an agreed contribution, unless the partner took part in its management.
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Doing Business
There are a few options foreign companies can choose from when doing business in Singapore.
Branch of Foreign Company
A business entity that could be set up is a branch of a foreign company. Unlike a local entity incorporated in Singapore with its own legal personality and liabilities, a branch is an extension of its head office incorporated overseas. As such, liabilities of the branch office in Singapore are extended to its parent company. A branch office is not eligible for the same tax benefits or rebates offered to a local entity.
Representative Office (RO)
An RO can be registered in Singapore as a temporary arrangement for conducting market research and feasibility studies. The key benefit of an RO: it allows a foreign entity to assess Singapore’s business environment before setting up permanently. As an RO cannot generate income or solicit business, it will not have to pay taxes. An RO that decides to continue its presence in Singapore should register as a legal business with ACRA and, if necessary, obtain the relevant licence to perform any regulated activity. To open an RO in the manufacturing, international trade, wholesale, trade and trade-related business sectors, approach Enterprise Singapore (ESG). To register an RO in the legal sector, visit the Legal Services Regulatory Authority (LSRA), a department under the Ministry of Law. A bank or insurance company should approach the Monetary Authority of Singapore (MAS) to discuss their plans for an RO.
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