Why Incorporate a company in Singapore
Incorporating companies in Singapore has its definite advantages. Singapore is an international business hub with high technology and advanced infrastructure to cater to all types of businesses.
Doing business in Singapore is also very easy as Singapore is business friendly. Singapore’s corporate tax rate at 17% (correct as at 2019) is one of the lowest in the world.
The Global competitiveness report 2018-2019 ranks Singapore as the 2nd most competitive country in the world for doing business.
Picture: Singapore’s Central business district, Li Yang, Unspash.
Singapore is an affluent country ranked amongst the wealthiest in the world and has one of the highest concentration of wealthy people and is ranked as one of the safest places on earth for personal safety.
Singapore is also a global haven for wealth management with its range of financial products on offer. Many wealthy people from across the region use Singapore as a base for portfolio management as well as asset diversification.
Some of the reasons for setting a company in Singapore are: –
- Asset diversification
You can diversify your assets under personal name or using a corporate structure.
Diversifying assets under personal name to open a priority account or private banking account with some of the following services: –
- Multiple bank accounts
- Accounts in different countries
- Multi-currency accounts
- Or Join as private banking customer
- Investment in products such as bonds, Unit trusts, Universal Life and insurance products, etc.
Diversifying assets under Corporate structure via Incorporating a company: –
- Corporate bank account
- Corporate bank accounts in different countries
- Multi-currency accounts
- Setup the company as an investment holding company
- Setup the company to conduct business activities as an extension of your businesses in your home country.
The personal name structure is the simplest, but limited in scope. The corporate structure avails more services and possibilities to the shareholders.
Under the operating company corporate structure, you can run a business and use your business to invest in the company’s operations as well as other related assets that supports the business, alternatively the operating company may also invest in assets such as buying shares, opening a share trading account or to buy commercial properties.
In Singapore, a board resolution needs to be passed to incorporate a new business activity. And once a board resolution is passed, your corporate secretary can file a new business activity for your company. Once the update is completed, you can download a copy of your business file (bizfile).
Prior to opening any such accounts, the bank, the securities broker or the financier will require your business file (bizfile) to have the appropriate business activity before they can on-board your company as a client.
Every company has a maximum of 2 business activities. Here is a sample of the business activities of a company: –
Figure 1: Bizfile snapshot of listed Principal Activities, iCompareLoan.com
Pooling of resources
If you contemplate starting an investment holding company in Singapore, you could easily pool resources to acquire assets such as properties, shares or acquire alternative assets. By pooling assets, you can get a number of people (Shareholders) to partake in a bigger asset through pooling of funds. In Singapore, you can pool together up to 20 individuals as shareholders for an Exempt Private Company limited by shares. This means that if you are attempting to buy an asset that cost $1,000,000, with 20 shareholders each forking out $50,000, you could participate in an investment that you otherwise would not be able to afford.
Myth – Only the super rich can incorporate a company in Singapore
It is a myth that only the super rich can incorporate a company in Singapore. You can start a company for as little as a few thousand Singapore dollars. The paid up capital can be small, we can increase the paid up capital at a later stage.
Ease of Disposal of assets under a corporate structure
Under a corporate structure, you can dispose of assets partially. Let’s say you own a $1,000,000 commercial property, you can sell 10% of your shares for $100,000. This would not be possible if you owned the property under your personal name and you suddenly needed $100,000, you will have to dispose of the entire asset at a steep discount.
You could also borrow from investors by issuing preferential shares or issue debt so as to leverage your capital to acquire even bigger assets. If your company is able to build a track record with revenues and cash flow, you could access bank loans.
There is a difference between investment holding companies and operating companies. Investment holding companies are generally deemed as those whose sole business activity involves holding assets such as shares or properties and derive most its revenues from holding assets. Such companies typically have a harder time to borrow money from financial institutions whereas an operating company with verifiable income from revenues and a minimum of 30% local director shareholdings may have loan facilities more easily available.
Buying of shares under a corporate structure to hold shares or assets presents opportunities to scale up the portfolio, with opportunities
Planning for a future
You may intend to build an overseas Head quarters in Singapore, this could potentially offer you some tax incentives if you are already operating a business. Alternatively you could set up shop in Singapore, start small and let the business grow and have your children take over it. This could also create career opportunities for your children to become directors and/or employees of the business.
Incorporating a company in Singapore is easy, if it fits your family needs.
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