Starting a Business in Singapore

I see that there have been a number of posts regarding the Entrepass and that I have been referred as someone who knows how this works. Thus, I post for you my own knowledge and experience in starting my own business and obtaining my Entrepass.

First, the caveats, the limitations, and my general statement of use: I make no guarantee that the information I have posted is correct (although I have endeavored to be accurate). I make no guarantee that any of my advice will get you want you want. I accept no responsibility for any outcomes you may achieve as a result of employing my advice. This is not legal or professional advice and I do not hold myself out as a subject matter expert.

Allow me to further add that I have no specialized knowledge of the criteria or weighting systems by which any governmental entity approves or rejects an Entrepass application. Neither have I spoken to any government official as to what they are looking for in a new business or why they are looking for it. Thus, please treat all my comments and observations as to what works and does not work as ruminations of an inventive mind that may or may not reflect the official positions and policies of the Singapore authorities.

OK, now that the mumbo jumbo is out of the way:

I have incorporated a private limited company in Singapore, applied for an Entrepass, and have run a successful business for more than two years. My application for renewal of my Entrepass was approved for another two years. What follows is a compilation of my own experiences and the advice received from others when I made my application.

The Official Information

The Ministry of Manpower (MOM) is the official source of all information regarding the Entrepass. Make sure you have fully read all the information and FAQs to understand what MOM expects.

http://www.mom.gov.sg/foreign-.....fault.aspx

updated 31 Jul 2008 with new link to MOM website
updated 26 Feb 2013 with new link to MOM website

You can always call them, or better yet, if you have detailed questions, go down to MOM and ask to speak to someone about setting up a company. They are quite helpful.

Why Does the Singapore Government Issue the Entrepass

The Singapore government wants to attract new businesses to Singapore for the following reasons.

1. To import technical and scientific knowledge into the country
2. To import business process, business management, and project management expertise into the country
3. To import experts in finance, trading, and investment
4. To attract significant foreign capital investment
5. To establish businesses that employ Singaporeans
6. To attract businesses that will provide a net positive contribution to the Singapore economy in terms of foreign exchange earned, taxes paid, revenues generated, people hired, etc.

In short, the Entrepass is issued not to help you but to help the Singapore government build a thriving economy that employs local people.

Thus, when preparing your business plan for your new venture (more on business plan requirements, below) you should be sure to address and emphasize one or more of these reasons for having your business in Singapore.

Note also that if the business you are proposing is one that a Singaporean could start and run, and you dont offer at least one of the above items, you may not get approved. For example, if you want to run a one man/woman restaurant, you probably wont get approved. If you want to open a restaurant that requires substantial capital for startup and will employ Singaporeans as cooks, waiters, accountants, etc. then your chances for approval are much better.

Update 26 Feb 2013: Types of businesses which will not be approved are now listed, but this list is not all inclusive. It includes hawker centers, coffee shops, food courts, bars, night clubs, karaoke clubs, massage and acupuncture, Chinese medicine, and geomancy.

On the other hand you might start a successful one person business if you want to engage in futures trading in Singapore, have the expertise, and the capital to undertake trading. There are many different businesses and you must know enough about your business to develop a sense of how it will create value for the Singapore economy. Then emphasize that value.

Do I Need an Entrepass?

If you are starting a new company in Singapore then the answer is yes. If you incorporate a new company, then attempt to file for a regular employment pass, you will be rejected because the Singapore authorities want to see how your new business will work and if you are capable of running it.

Update 26 Feb 2013: Because the new Entrepass requirements regarding annual turnover and number of Singaporeans hired, most professionals wanting to start a business (forex, trading, consulting, etc) cannot use the Entrepass because they will never grow that large... a one man band, as it were.

However, skilled professionals have successfully created a private limited with the use of a nominee director, then applied for an Employment Pass for themselves, with success.

The key to successful applications appears to be a strong track record in the business activity, an existing client base, and/or contracts that provide work in the future. You will find no rules regarding this, and MOM treats such applications on an individual basis.

It is safe to say that if you plan on doing an end around the Entrepass process and you do not have the skills or clients, you won't get approved

Your Company and the Entrepass

MOM makes no reference as to the type of business that will be approved (sole proprietorship, private limited company, limited company). I know of individuals who have successfully obtained an Entrepass as a sole proprietorship and the business is specialized and falls under the category of bringing in financial expertise. In general though, you should start your company as a private limited company. There are several reasons for doing this:

1. You will be seen by MOM as being serious in your business undertakings and possibly more sophisticated as well.
2. It IS harder to set up a private limited company, and it does cost more but the benefits far outweigh the costs.
3. You will be treated much better by banks and in business to business transactions as a private limited.
4. Your personal assets are protected from lawsuit should your company be sued.

Strong Eagles Advice: Incorporate as a private limited company (or as a limited liability partnership) and look like a business pro. You will also want to have audited financial statements once your business is running, even though this is not a requirement because it lends credence to your financial position when you renew your Entrepass or seek employment or work passes.

Update 26 Feb 2013: New Entrepass/ACRA regulations require that any business set up for an Entrepass must be a private limited. Sole proprietor setups for Entrepass are no longer accepted. It would seem reasonable that a limited liability partnership would also qualify but this is not explicitly stated.You will need to contact MOM and ACRA if you want to go this route.

Get Professional Help

Yes, you can set up your own company by yourself but unless you are thoroughly familiar with the laws of Singapore you will be much better off using a competent accounting firm that knows all of the paperwork details. Yes, it will cost you a couple of thousand to do it all but this is really peanuts in the scheme of things. You don't really need a lawyer unless you have a truly arcane and complex business; a competent CPA will do the trick. You can email me for the name of the firm I use.

The Chicken and the Egg

First, remember that you cannot have registered your company with the ACRA (Accounting and Regulatory Authority) more than six months earlier than you apply for your Entrepass. Check out the website for the types of business entities you can register here.

updated 31 Jul 2008 with new ACRA url's
updated 26 Feb 2014 with new ACRA url

So, you might want to consider filing your new business 2 to 4 months out from the time you submit your Entrepass application.

If you elect to start your business as a private limited company, it will require ONE local director who is a Singapore citizen, permanent resident, or employment pass holder. If MOM approves your application then you can be the local director of your company. But here is the problem: You cannot file for your company until you are approved and hence you cannot supply MOM with information about your registered company. You put yourself at a disadvantage.

Another interesting problem: If you have a registered private limited company it can act as your guarantor, thereby eliminating the need to put $3,000 in a bank so that they will issue an indemnity bond. If you dont create your company first, you will not have a company that can sign for your repatriation expense. Note that a sole proprietorship will not be accepted as a guarantor.

Strong Eagles Advice: Find a company that will supply a local director and get the company incorporated BEFORE you apply for the Entrepass. There are plenty of protections available for you, and once you have your Entrepass your original director can resign. Many firms offer this service and I can recommend that company that I used/use.

Update 26 Feb 2013: The latest Entrepass application form asks that you provide either a bankers guarantee, or a local sponsor willing to assume the liability. You could ask the firm that supplies your nominee local director to also be the sponsor, or, because you must now have a minimum of S$50,000 in paid up capital, you may be able to guarantee yourself.

Also be aware that the information on the MOM website is somewhat confusing. On the first page, it says that a company created at ACRA cannot be more than 6 months old (which is true). On the approval process page, it says you take your approval in principle letter to the ACRA in order to get your company formed. You can do it this way; just be aware that you can also use a resident director to create the company before you are approved for the Entrepass.

Changes to Entrepass Requirements and Conditions

Section added 26 Feb 2013

In September, 2009, significant changes were made in the criteria for applying for an Entrepass, and for getting it renewed in subsequent years. This was done because far too many people, with no actual hope of starting and running a successful business, were using the Entrepass as a "backdoor" to circumvent normal employment and work pass requirements.

The new requirements are quite stringent. For your application to start up, the chief changes are:

1. The company must have $50,000 in paid up capital as demonstrated by a bank statement in the company's name.
2. Note that this cannot be a loan to the company. Paid up capital means someone had to buy $50,000 worth of shares and you will also need to demonstrate this fact with a print out from ACRA Bizfile showing the shareholders and holdings.
3. The Entrepass applicant must hold at least 30 percent of the shares in the company, or to look at it another way, must have contributed at least $15,000 in paid up capital.

Now, these are not unreasonable requirements, and if you don't have at least $50,000 anyway, your chances of success drop dramatically.

However, the requirements for getting your Entrepass renewed are much more stringent. In addition to the previous requirements of audited financial statements, CPF contribution history, ACRA registration documents, and an application form, you must also supply:

1. The tenancy agreement for your company. If you are running this out of your private residence then you need something from your landlord.
2. Depending upon the type of Entrepass issued, you need to demonstrate that you have hired 2 (P3), 4 (P2), or 8 (P1) Singaporeans/PR's into your company in the last 12 months of operations, AND, these people must have minimum qualifications: The full-time local employees need to possess at least National Technical Certificate (NTC2), National ITE Certificate (NITEC) or vocational qualifications obtained after at least two years of full-time studies.
3. Depending on type of Entrepass issued, you must demonstrate a "total business spending" (not revenue or turnover) of $300,000 (P1), $150,000 (P2), or $100,000 (P3).

In other words, you must SPEND this much in the 12 months preceding your renewal application. You get one more year if your net asset value is negative, two more years if positive.

If you got your Entrepass under the old rules, the new rules do not apply. No one knows what happens if these targets are not met; if anyone has experience with this issue, please post.

Your Business Plan and the Entrepass

Filing for an Entrepass requires that you submit a business plan describing the nature of your business. The Entrepass scheme is 3 or 4 years old (now 11 or 12 years old). In the past, business plans could be of any length (mine was 26 pages) but now you are limited to 10 pages (I assume you will not be penalized for a cover page and an executive summary that adds a page or two). Therefore it is more essential than ever that your business plan clearly quantify how you intend to make the business a success.

Your business plan is evaluated by both MOM and SPRING ( click here ). You should be aware that both of these agencies employ some of the best and brightest that Singapore has to offer. Thus, if you should submit a business plan that is inconsistent, makes wildly optimistic (and unsupported) projections, has financials that dont make sense, or suggests that you dont know what the hell you are doing, you will probably be rejected.

updated 26 Feb 2013 for new SPRING url

In addition to being bright, the government people that will process your application are also bureaucrats. Thus, you may rest assured that you must have every piece of documentation required so that the bureaucrats can check all the necessary boxes or your Entrepass application will be summarily rejected. This means that you should supply all relevant credentials, CVs, awards, certifications, past business financials, etc. There is no such thing as too much when you are attempting to demonstrate that you have the expertise to run your business.

What Is a Good Business Plan?

When you write your business plan be sure that it addresses the following points:

1. You demonstrate benefit to Singapore as I mentioned earlier in this document. In particular, show your corporate tax payments as part of your pro forma statements.
2. You demonstrate that you have specific expertise in the business you want to start. Youll have a lot harder time if you are currently a pudding salesman trying to start a business in which you do brain surgery.
3. You demonstrate that you have business expertise by showing that you understand financials, your market, your competitors, and your product.
4. You demonstrate that you understand that Southeast Asia business environment in which you operate.
5. You demonstrate that you have sufficient financial expertise by having clear and concise pro forma financial statements. If you dont have the experience then find an accountant that can build your financial statements based upon your projections.
6. Your financials need to be consistent. Start up and operational costs need to include all sorts of things, from office space, utilities, web sites, etc. to advertising materials and salaries. Your revenues need to be consistent. If you intend to sell 10,000 widgets at $6, then make sure your revenues are $60,000.
7. You demonstrate that you have sufficient capital to start and run your business until it is profitable AND sufficient funds to support yourself until the business is profitable. MOM will not actually want to see your bank deposit but if you are a business realist you really will have the necessary capital to cover yourself to profitability, otherwise you are doomed from the beginning. Updated 26 Feb 2013: You must now demonstrate a minimum of S$50,000 paid up capital in a bank account. It still might not get you an Entrepass, though, if the authorities determine it is not enough to get your business off the ground.
8. If you already have potential business lined up (as a consultant, for example) make sure that you note you already have potential business deals in the wings and only need approval to get started.
9. If you are going into a business that requires licenses and permits, demonstrate your knowledge of what permits and licenses you will need (export/import, for example).
10. Make note that you will be using Singaporean firms for your accounting, legal, and marketing (website, buz cards, etc.), and that you will be keeping your funds in a Singapore bank.
11. Although it is harder to do and still remain at 10 pages, try to include graphs and charts of key metrics in your business. Also make sure that your format is clean and well organized, not cluttered, hard to read, and densely typed. Presentation does make a difference.

When you write your business plan, recognize that its entire purpose is to get you the Entrepass. Thus, it will be different from a business plan that you would use to try and raise funds from investors, and it will be different from a business that you take to a bank to get a line of credit.

Your business plan is THE key to getting your Entrepass so make sure it is really good. Take your time. I went through at least seven drafts before I got a plan that I thought was suitable. I changed formats and I changed the points I wanted to emphasize.

What is in the business plan depends to some degree on what type of business you are intending to start. For example, if you are opening a retail business then you should be able to provide some sort of study or evidence that you can generate sufficient traffic to support your business. If you are starting a consulting business then your capital requirements will be fairly low but you should be able to demonstrate how you will get into the tight network in Singapore.

I have uploaded a table of contents which is essentially how my business plan was laid out. It may not be the right plan for you but it does show the elements that I covered. Youll notice that I provide an executive summary, review my company plans, address my services and products, analyze the market and how I will penetrate it, how my sales strategy will work, and how I will deal with issues such as workforce, technology, and competition.

http://www.herberts.org/miscdo.....ntents.pdf

Finally, I offer you a couple of websites that should help you devise your own business plan.

http://www.sba.gov/business-plan/1

http://www.businessnewsdaily.c.....lates.html

updated 26 Feb 2013 with new websites

I close with the following comment. If you cannot write a business plan for your business yourself it means you do not understand your business. If you do not understand your business then the chance of failure is high. So, the business plan is more than just an exercise to get an Entrepass. It truly defines what your business will do and how it will operate.

Source: Singapore Expats Forum

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26 Feb 2013
Singapore Expats Forum