Registering a business in Singapore in year 2020
Business Opportunities are anywhere around the world and 1 small error during the initial start-up can result in the loss of several hundreds of dollars of your hard-earned money. Below are some of factors to consider before registering a business in Singapore. Some of them may be areas in which people may not know of, i.e. You do not need to setup a company or a business if your trading is not consistent or only occurring once in a while. Or you should only setup a company if the activities of 2 or more subsidies are carrying out more than 2 activities in a same year.
Which entity should the business be?
In Singapore, there are more than 3 different types of entities that a business can be setup upon. Based on the purpose and the situation of the setup, each of them has their own unique advantages in it and it will be best to understand each one of them before deciding what to setup first.
This type of setup is best for business that does not expect to have high net returns as its tax returns is based on the additional amount that the owners had actually earned from other sources. Such a setup does not require much compliance and is the cheapest to maintain it. You just require to pay a basic license fee of $30.
Such an entity is most suitable for start-up business, as expenses are usually high and revenues are not constant or stable yet. It is also commonly used when your personal tax liabilities is high in which you can use this setup’s losses to bring the tax liability down.
Local Company/ Pte Ltd
This type of setup is best for business that have a Chargeable Income above SGD160,000 each year.
Chargeable Income are the net profits after deducting all deductible expenses and after claiming all claimable tax allowances. Businesses that have such a high Chargeable Income are usually quite sizable and have over a long reputation in the industry.
The benefits of running a business under such an entity is that it is easier to get loans and there is a limitation as to how much the company has to pay after having to file for insolvency. However it is much more expensive to keep it under compliance.
Limited Liability Partnership
This type of setup has both the benefits of running a Sole proprietor and a local company. It is kept as a separate entity from its owners, and it is not too expensive to keep it under compliance. However, it needs at least 2 or more shareholders in order to set it up. Once there are 2 shareholders, you can always remove one and still maintain it under a partnership.
After determining the business’ entity, the next consideration will be in which industry does the business should be in?
If you are simply doing the business out of fun or to kill time, then please do not bother with setting up the business at all as a business is very much like nurturing a child in which a lot of responsibility lies ahead and should never be taken lightly.
Running a business is never easy; if it is easy, everybody would be rich and successful now, but it is not. In fact, running a business is difficult, very often we might take a mistake or two but the most importantly is that we learnt from our mistakes during the process and make sure we do not repeat it again.
The industry that the business is in should always follow what you are doing best than rather what your interest likes. (Though interest and motivation are important as well) It should always be something that you can always do better than others, or perhaps something that you can do equally as well as others. However even if you do not know your speciality and is seeking to seek advice, you can always seek professional advice on what to do from any of our HR professionals.
The competitiveness of the industry is also another important factor that should be considered.
It indicates how difficult it is for the business to penetrate into the market and get new customers and also how easily can your customers can switch to your other competitors within your industry.
However, even if your industry is very competitive, it does not mean that the business should not be in this industry, but should be ready for a much more tougher time managing it.
Determining the amount of Paid-out Capital
Paid out Capital is the amount of money that the company has to fork out in the company decides to file for bankruptcy. It is also one of the determining factors of considering the size and capability of the company. There is no exact amount of paid-out capital that you should set, but ultimately the paid-up capital should be as low as possible, but should be high enough to cover the expenses of the targeted type of project for at least 3 – 6 months, depending on the type of industry it is.
Financial Support for the Company can be found anywhere, either from the friends, relatives or perhaps from the banks or perhaps from some angel investors. However, friends and relatives usually do not have the money to support you and angel investors and banks need concrete evidence, e.g. business plans and financial statements in order to proof that business is indeed growing and sound before granting the finances. This, however is rather impractical for start-up companies and thus it is always more useful if you know the other method, cost cutting.
Drafting of a proper business plan is very important as it provides a rough guideline on how your business should be run. A complete business plan should include all the information that was provided above and should be as comprehensive as possible but should not be too rigid. As the industry keeps changing, so should the business plan be. However not doing a business plan might sometimes deprive the business a proper plan of the steps that needs to be carried out.
Location is also an important factor to consider about, especially if your business involves customers to physically be there to consume or enjoy the service, e.g. F&B Industry and Beauty Salon Industry are industries where customers need to be physically there in order to enjoy freshly cooked food or enjoy personally customized service. But as technologies advances, location will slowly be moved over to online positioning where the volume of online traffic becomes the more important factor.
Finally “Getting Sales” is the final and most important aspect in incorporating a business. There may be a lot of ways in getting sales, but it all points down to advertising. Although Advertising may be important but the business should also remember not to overspend on it as not all forms of advertising to your industry. It is always best to seek advice from others within the same industry, advertising industry, payroll services Singapore or business consultants for advice on which advertising media is best suited for your industry.