4 Important Points To Consider Before Business Registration
By choosing to become an entrepreneur, you have already demonstrated your leadership trait and the drive to see your idea materialize. You have decided to take the next major step to realize your vision, that is, register your business, but don’t forget, this process involves key stages that need some careful consideration. The following article is an overview of the four fundamental points to ponder before registering your business.
1. The Business StructureThe structure or type of entity that will ideally suit your company must be identified. This will largely be determined by the nature of your business and your operational plan.
If your business is less risky and will not attract any legal claims and if you intend to start small and eventually grow then you may consider a Sole-Proprietorship. If you plan to work with a partner instead of flying solo, then you may register your business as a Partnership firm. The registration cost and annual compliance requirements are very minimal and will be subjected to tax at personal tax rates. However, the major drawback of these entities is the lack of protection and therefore the personal assets of owners whose liabilities remain unlimited will be attached in case of any legal claims. If you want to limit your liability and take advantage of low registration expenses and minimal ongoing compliance then Limited Liability partnerships (LLP) will be the best route to go. Also take note that when you are registering a Sole-Proprietorship, Partnership or LLP it is your prerogative to keep your CPF Medisave contribution up-to-date and therefore obtaining a statement from the CPF Board to ensure this.
Limited Liability Companies are the most common entity type among SMEs. Entrepreneurs who wish to limit their liability and alienate their personal assets against any potential legal claims opt for this entity type. This is an ideal setup, renders more credibility to your business and will be helpful in raising investments or loans. It also facilitates easy succession planning and transfer of ownership. More importantly you will be able to enjoy the highly competitive corporate tax rate of Singapore and also avail the tax exemption benefits available for new companies. However, the initial incorporation cost and ongoing compliance requirements are relatively tedious for Limited Liability Companies. A Limited Liability Company needs a minimum of one director and shareholder, although both can be the same individual. At least one director should be ordinarily resident in Singapore. Foreigners without relevant residential or employment visas can make use of the resident director service offered by corporate service providers.
Before deciding on the structure, you must carefully evaluate the nature of your business, your visions for the future and your ability to comply with the regulatory requirements. If you are going to operate on a really small scale or freelance, then Self-Proprietorship or Partnership is sufficient – generally self-employed people use this vehicle. However, if you have big plans for growth, plan to employ more people and your business involves more risks, then it is advisable to choose a limited liability company.
2. The Business NameThe name you choose for your business, while being unique and relevant for your business, requires the company registrar’s approval. Choose a name that is not obscene or vulgar. It must not infringe with any trademark or be too similar or identical to that of any existing companies. The approval process is fast, within an hour, however if the chosen name includes certain restricted words involving regulated and strategic sectors such as bank, law, finance, media etc then the relevant government agency or authority will need to review it. In such cases the approval may be delayed by a few days.
To avoid any delay or disappointments, check availability before choosing a name. You may do it online on ACRA’s website. Make sure that the name you choose is representative of your business philosophy, nature, product or service and positioning. Nowadays it is also essential to check if the name is available as a domain name for the website that you will be creating. It is critical to have a website or at the very least a professional looking email address for which you will have to check the availability of the domain name.
An approved name will be reserved for 60 days from the date of application. You can extend the name for another 60 days by filing an extension request just before the expiry date.
3. Registered AddressAt the time of registration you will have to provide a local physical address. All official notices and correspondence will be sent to this address only. The Urban Redevelopment Authority (URA) must have approved the premises for commercial use.
If you are a small business owner or decide to operate from your house to save on office rental expenses in the initial years, then permission for such use must be obtained under the Home Office Scheme (HOS). If the residential property is a HDB flat, approval must be sought from the Housing Development Board. If it is a private house, the URA is the relevant approving authority. It involves a small fee. It must be noted that businesses operating under HOS cannot display any signage or employ more than two non-residents at that address. Certain types of business are disallowed under the scheme so make sure that your business type does not feature on the list.
4. Business LicensesCertain types of businesses require licenses before they go operational. Although you will be able to apply for licenses and permits only after you complete the business registration process with the Accounting and Corporate Regulatory Authority (ACRA), you should preemptively familiarize yourself with the regulatory regime related to your business. This will prevent you from running afoul with the law. You may refer to the License One website to find the licenses and permits relevant to your business.
Businesses such as restaurants, educational services, financial services and entertainment services require a license and permits from various government agencies. For example a restaurant will need a Food Shop License from the National Environment Agency and a Liquor License and Public Entertainment License from the Singapore Police Force among others.