1. Select the legal form that your company will take
These are the most common forms of legal business organisations:
- A Sole Proprietorship
- A Partnership
- A Limited Partnership
- A Limited Liability Partnership
- A Company
- A Business Trust
Typically, most businesses in Singapore are started as a Private Limited Company, for the reasons elaborated on here.
2. Choose a name
To choose a suitable business name, you can get ideas from the following:
- Our guide on choosing a desirable business name
- Our domain name search service, that helps you ascertain availability of domain names before you register a company name
- Brainstorming for name ideas amongst your principals
3. Write a Business Plan
Prepare a preliminary business plan. Set out your mission, vision, short-term and long-term goals, and demarcate your journey with key milestones that would enable you to track and monitor the progress of your company.
A business plan is also useful for the company to furnish to banks/ other potential investors/ suppliers/ trade partners in order to secure loans and/or credit facilities, because it gives them the assurance that you have concrete plans that will result in viable economic activities.
Memorandum and Articles of Association
Apart from the business plan, you will also need to consider and/or draft the company’s constitutional documents, i.e. the Memorandum and Articles of Association (M&AA). These need to set out the key characteristics of the business, how the company is internally regulated, and the manner in which members (shareholders, directors, officers etc) interact. All companies must have an M&AA, as it is required by statute and for the incorporation process. You may either choose to use the standard one found in the Companies Act, or you may design your own. The Memorandum and Articles of Association are meant to complement each other, however, if there is a conflict between the two, provisions in the Memorandum will prevail over those in the Articles.
The Memorandum defines the company and should at least contain the following:
- name of the company
- details about the company’s share capital
- full names, addresses and occupations of the subscribers to the memorandum and
- a statement indicating the subscribers desire to form the company and their agreement to take up shares in it.
The Articles of Association generally contains provisions that regulate the internal management of the company. Companies are generally free to decide on the content of their articles, but the articles normally deal with matters that relate to:
- the issue of share capital and the variation of rights attached to shares
- liens and calls on shares, as well as, transmission and forfeiture of shares
- procedures for general meetings of the company and notices relating to the same.
The legal effect of the M&AA is that it is considered a statutory contract between a company and its members, and among the members themselves, binding even upon new members entering the company after incorporation of the company. Non-compliance with the Articles is amount to procedural irregularity and therefore: i. where the non-compliance is by a company, a member may be able to obtain a declaration or injunction requiring the company to comply, and ii. in case of non-compliance by a member, another member of the company may be able to obtain declaratory or injunctory relief or damages.
4. Incorporate your company
Once you hire us to incorporate your company, you will have your unique business registration number that will allow you to open a company bank account, see to your IRAS / Ministry of Manpower / Central Provident Fund and other legal/regulatory matters, among other things.
5. Open the Company Bank Account
Select a bank and open the company bank account. See here for Bank Accounts in Singapore for your considerations on what bank to choose and what your requirements are.
6. Lease an Office, Warehouse or Retail Space
You would ostensibly have already budgeted a large portion of your capital to the rental expenses (especially in Singapore) when you plan your operations for the first few months.
A general rule of thumb is that 3 months’ worth of rent is required for your very first payment— 1 month for the first month’s rent payable in advance + 2 months for the security deposit (varies between 1 and 2 months).
In some instances, purchasing the property rather than renting it would be preferable from a long-term perspective because the company’s average monthly expenses would be significantly lower and the company would own that property at the end of the mortgage payments.
7. Obtain Licenses and Permits
Depending on the type of business you are in, you may require a license or permit if your business is involved in: the advising on finance, investments, capital markets and/or other financial activities; the preparation of meat or food products; broadcasting and publishing; the sale of alcohol, tobacco or explosives, among others.
The following also need licenses: building contractors, banks, insurance carriers, accountants, lawyers, real estate agents. Do consult us on whether your business requires additional licenses to operate.
Goods and Sales Tax Registration
You will need to register for GST for your company, if your business:
- taxable turnover for the past 4 quarters* is more than $1 million (unless you are certain that business turnover in the next 12 months will not exceed $1 million); or
- is currently making sales and you can reasonably expect your taxable turnover in the next 12 months to be more than $1 million.
[*Business turnover for the past 4 quarters (a period of 3 months ending on the last day of March, June, September or December) is determined at the end of any quarter and consists of the total value of your turnover in that quarter and the previous 3 quarters.]
In which case, you need to apply for GST registration within 30 days of the date which your registration liability arises.
However, you may also choose to register for GST on a voluntary basis if after assessing your business you feel a need to do so.
8. Hire Employees (if applicable)
If you intend to hire yourself or others as full or part-time employees of your company, then you will have to bear in mind labour laws of Singapore, namely the Employment Act and its regulations. Additionally, you will be required to register under the various government authorities like the Ministry of Manpower, and the Central Provident Fund. The Central Provident Fund contributions (by the employer) are mandatory for any Singaporean employee earning at least $50 a month. If you are employing yourself and you are a Singaporean, you will also have other liabilities like Medisave contributions.
If hiring more than one employee, you may also need to set up a system of processing payroll to your employees.
You may even possibly be required to obtain Insurance for certain types of employees under the Work Injury Compensation Act (WICA). Employers are required under WICA to maintain work injury compensation insurance for:
- all employees doing manual work, and
- non-manual employees earning $1,600 or less a month.
Failure to do so is an offence punishable by a maximum fine of $10,000 and/or imprisonment of up to 12 months.
Although it’s not mandatory for you to maintain insurance for non-manual employees earning more than $1,600 a month, in the event of a valid claim by such an employee, you will be required to compensate the employee accordingly, even if you do not have insurance. As such, you will have to weigh such risks with the cost of insurance premiums in deciding whether or not you wish to obtain insurance for this group of employees.
Alternatively, employers are allowed to use one or more insurance policies to cover all the liabilities that they may incur under the Work Injury Compensation Act. Companies with existing insurance policies. Therefore, you can choose to adjust your existing policies (e.g. by adding riders) to ensure that your overall insurance coverage meets the requirements under the WICA.
Other employees may require professional indemnity insurance coverage, covering their professional liabilities.
9. Set up an Accounting and Record-Keeping System
Setup your Accounting and Record-keeping system in order to be able to easily comply with laws and regulations pertaining to taxes, filings and other submissions to the authorities.
Company documents generally are required to be kept for a certain number of years, including: a list of key principals and their addresses, copies of all incorporation documents, financial statements, annual reports, amendments or changes to the company registers and such.
10. Develop your Business Identity and Establish Your Presence
As you would have already bought your domain name after the initial stages of checking for your company name availability, the next step thereafter should be to hire a professional to develop and maintain your website.
Additionally, create your letterhead, business cards, brochures and other collaterals and/or promotional materials for the marketing of your business. A professionally created logo can be extremely beneficial to your business in the long run, so do not hesitate to invest in the services of an established professional to be able to distinguish yourself from your competitors out there.
Once you have all these, you can proceed to market your new company according to your focused business and marketing plans and propel the company to greater heights.