Can an Employment Pass Holder Start a Business in Singapore?

An Employment Pass (EP) is a work visa for foreign professionals seeking employment in Singapore. To qualify, candidates must meet a minimum salary requirement based on age and sector and pass a points-based assessment called COMPASS. The pass also opens business opportunities, allowing foreigners to register a Singapore company. These advantages make the EP highly desirable for skilled professionals and managerial staff.

The EP will only applied once the company is registered with ACRA. Initial steps include choosing a company name, engaging a corporate service provider, preparing required documents, obtaining approvals, registering with ACRA, and opening a corporate bank account.

Registering a business in Singapore is efficient, typically taking 1-3 days. Upon validation, ACRA issues a Certificate of Incorporation and Business Profile, marking the official start of your business journey.

Here are the specifics of each step.

Choosing the right business structure

Choosing the right business structure is crucial. In Singapore, foreigners can start a sole proprietorship, partnership, or private limited company (Pte Ltd) under Singapore company law. A private limited company is often favoured for its credibility with banks, investment opportunities, and limited liability protection.

A Limited Liability Partnership (LLP) combines the benefits of a partnership and a company, making it attractive for certain business models. Sole proprietorships are recommended for low-risk businesses due to minimal compliance requirements but lack a separate legal identity, meaning a sole proprietorship's business expenses can directly impact the owner's personal assets.

Preparing required documents

Preparing the necessary documents is fundamental for company registration. For EP holders, this list includes:

• a company constitution;
• details of shareholders and directors;
• a company secretary appointment, ensuring compliance with regulatory requirements.

When registering with ACRA, additional documents such as the proposed company name and business activities, are also required.

Engaging a registered filing agent

An incorporated company in Singapore operates as a separate legal entity and provides more robust business capabilities for entrepreneurs.

Engaging a registered filing agent can simplify the corporation process. These agents, such as Corporate Service Providers (CSPs), assist with regulatory compliance and documentation and act as your authorised representative in front of the corporate regulatory authority.

Hiring a CSP benefits foreign individuals unfamiliar with Singapore’s regulatory landscape. Their expertise ensures all requirements are met and may potentially expedites registration. Since they are legally required to have your best interest as a top priority, you can entrust them with anything you need to form a new company.

Every company in Singapore must have at least one local director who is a resident or one of the permanent residents. EP holders cannot fulfil this role if employed elsewhere, so they must appoint a local director to meet legal requirements.

Options for appointing a local director include hiring a nominee director or appointing a friend or family member who is a Singapore Citizen, Permanent Resident, or EP holder. The local director manages company operations and ensures regulatory compliance.

Foreigners with an employment or entrepreneur pass can own 100% of a private limited company's shares. They can also easily recruit foreign talent, accessing a diverse and skilled workforce. However, they cannot operate as a sole proprietor in a sole proprietorship.

However, EP holders must prioritise local hiring under the Fair Consideration Framework. Despite these challenges, Singapore’s strategic location, strong intellectual property laws, and government support through grants and incentives make it an ideal place for EP holders to start their businesses.

Starting a business in Singapore comes with challenges. High rental prices can be a financial burden, as Singapore has some of the highest rental costs globally. Additionally, the traditional workweek averages 45 hours, which may be challenging for those accustomed to shorter workweeks.

Despite these challenges, solutions exist. Co-working spaces offer a cost-effective alternative to traditional office rentals. Understanding and adhering to Singapore’s stringent business registration requirements can help avoid pitfalls. Staying informed about recent policies and workforce trends aids in navigating workforce shortages.