Setting up an E-commerce company in Singapore
5 minute read
Due to the increasing cost of infrastructure and corporate maintenance many business owners are turning to the world of online commerce. The benefits of the digital world require some planning and like any business an investment of time and money.
Below we have outlined some of the steps to successfully start your own online business:
- Step 1: Research and Planning
- Step 2: Funding and Financial Assistance
- Step 3: Choosing the right Business Structure for Singapore Business
- Step 4: Incorporate your business
- Step 5: e-Commerce infrastructure
- Step 6: Bookkeeping and Accounting
- Step 7: Tax Compliance
Step 1: Research and Planning
Conducting initial market research is an essential first step to give you an idea about your target market, how to access them and to assess the expected demand for your product or service?
Your initial research should typically answer questions such as:
- What product or service will you be selling?
- Who will be your buyers?
- Where and how you’re going to obtain your products?
- What are you doing to fund your business and what is your plan B?
- Who are your competitors and what is your competitive advantage?
After having the answers to the above questions it’s time to draw your business plan. This will be your roadmap which will help bring your ideas and thoughts together. A business plan is crucial in determining what to prioritize and how to effectively reach new customers.
Step 2: Funding & Financial Assistance
Financing programmes, tax incentives, cash grants, venture capital and business-incubating infrastructure – everything that a startup needs, Singapore is sure to have it.
In fact, e-commerce businesses have access to a variety of different funding and financial instruments to help grow their businesses.
- The old school-business loans: Perhaps, the most straightforward way to get more money to fund your business. But this convenience comes with a huge risk and cost of losing not only your business but also your capital if things do not work as per the plan.
- Investors: Contrary to the traditional loan, this does not require the repayment of the principal amount in its monetary value. As an exchange for the investment in your business, the investors claim a part/ share of your business.
- Government Funding: Singaporean government has been very proactive when it comes to new businesses and always on the lookout for new investment. Several initiatives allow start-ups and specific industry businesses to have access to the funds. Grants, business incubator schemers, and tax incentives are few such initiatives.
For more details on funding for your business refer to our other short resources:
- Grants & Funding Schemes in Singapore for Entrepreneurs
- The 6 main sources of funding for your startup in Singapore
- A beginner’s guide to accelerators and incubators in Singapore
Step 3: Choosing the right Business Structure for Singapore Business
E-commerce entrepreneurs can condisder using one of the following business structures:
- Private Limited Company (Pte Ltd)
- Sole Proprietorship (SP)*
- Limited Liability Partnership (LLP)*
*Available only to Singapore citizens, permanent residents or Entrepass holders.
Private limited companies offer the best choice to run an online business ideas in Singapore. A Pte Ltd limits your liability to the amount you have invested in its shares, provides access to attractive tax incentives among many other benefits.
An overseas company looking to set up in Singapore can use one of the following business entities to register a local presence in Singapore:
- Subsidiary Company
- Branch Office
Step 4: Incorporate your business
Here are some key facts on opening a company and doing business in Singapore and what you need to Incorporate your business:
- Company name: We recommend having a shortlist of three in case your first choice isn’t available.
- 1 or more directors: Directors must be individuals, aged 18 and above, who have not been disqualified to hold a directorship in Singapore or elsewhere.
- 1 or more resident directors: At all time you will need at least one locally resident director. At the time of incorporation this is someone who is a Singapore citizen, Permanent Resident, or holder of an EntrePass visa.
- Between 1 – 50 shareholders: A shareholder can either be an individual or a legal entity like a trust or another company. Singapore permits 100% foreign ownership of Singapore companies.
- Paid-up capital: The minimum paid-up/share capital for a company to register in Singapore is S$1. Any time post incorporation, the share capital can be increased.
- A registered address in Singapore: The address that is provided for the company must be located in Singapore. It must be a physical address and a P.O. Box will not be accepted.
- Company secretary: Every company must appoint a company secretary. This individual will help the directors to prepare and file all necessary documentation to keep the company compliant.
- Auditor: Unless the company has been exempted from audit (which is the case for most start-up companies), within 3 months of incorporation, every company must appoint an auditor.
Few other helpful things to keep in mind when registering a company:
- Company Name: Aside from the obvious strategic and brand value there are other considerations that may guide your choice of company name. We’ve captured some of the Hottest Tips for Picking Your Company Name.
- Tax Incentives: Many new companies in Singapore are eligible to receive appealing tax incentives and exemptions. This is one of the primary reasons that entrepreneurs from around the world prefer to form their company in Singapore. We’ve captured the highlights in our 5 minute Guide to Singapore’s Corporate Tax System.
- Business Activity Classification: At the time of incorporation every business in Singapore must select an SSIC code intended to describe their intended business activity. SSIC codes are used as a means Government Statistics purposes and some codes require the need for specific licenses. Stumped as to which SSIC code to pick for you company? We’ve made a shortlist of the most common 100 used codes.
- Licenses & Permits: Some SSIC codes, company names and business activities are restricted and require the application of a license prior to being able to conduct business. The good news is that Singapore has set up a business license portal that aims to deliver user-friendly and efficient licensing experience. For more information you can refer to our Guide for the Most Common Licences and ACRA’s guidelines on restricted company activities.
- Insurances: When starting a business in Singapore, it is important to think about what insurances your business may need. By having such protection in place, it will allow you peace of mind to run your business. We’ve highlighted the 3 types of insurances every company should consider.
Required documents at incorporation:
To incorporate your company in Singapore, you need to file with ACRA (the Accounting and Corporate Regulatory Authority), who manages company registration in Singapore. You will need to provide:
- Name of company
- Brief description of activities & SSIC Code
- Details of shareholders and KY information
- Details of directors and KYC information
- Registered Singaporean Business Address
- Share capital details
- The company’s constitution
Get your incorporation checklist here
Want to get started? This is what you need to file your new company in Singapore.
For complete step-by-step guide on setting up a company, find our ultimate guide on how to register a company in Singapore.
Not a local? Not a problem.
Step 5: e-Commerce Infrastructure
Once your company is successfully registered, the next step is to consider what tools and infrastructure you may need to build your e-commerce business.
- A domain name: This is the name of your brand. Make sure you pick a domain name that represents your identity and is easy to remember. You can use domain providers such as GoDaddy or Vodien to register your domain.
- Website hosting: A hosting site will ensure that you have good security, bandwidth and that your site will be up and running all the time. Often domain providers also providing website hosting services.
- Web design: Your website is the face of your business. Make sure the design is user-friendly and provides adequate information to the user about your product. Many entrepreneurs leverage templates and tools from Shopmatic, Shopify and Amazon to quickly and easily build their online stores.
- Marketing and advertising: A strong marketing plan is essential to ensure that more people find out about your business. Many e-commerce entrepreneurs leverage social media platforms and other paid online marketing channels to advertise their services and products.
- Payment Gateways: These are solutions that allow e-commerce sellers to collect payments from their customers in many different ways other than cash or bank transfer, such as by credit cards or digital wallet payments. Examples of payment gateways include Stripe (see our exclusive Stripe deal here), Omise, PayPal and Ecommpay.
Step 6: Bookkeeping and Accounting.
Bookkeeping and accounting is a mandatory requirement of any incorporated company.
From day one, all directors should seek to put in place a good system for easily tracking and accounting for all business transactions. Aside from the obvious benefits of knowing your financial position and cash flow, keeping track of a company’s accounts is important for securing future business loans and investment.
Due to the high volume transactions many e-commerce businesses choose to leverage accounting software to help automate much of the accounting and bookkeeping requirements for their businesses.
Accounting and inventory management software like Xero and A2X (for Shopify & Amazon sellers) can help to easily keep track and reconcile sales invoices, expenses and bank transactions. The good news is that today many of these solutions integrate together and even to the different banks in Singapore to make your life even easier!
Step 7: Tax compliance.
All Singaporean incorporated companies must adhere to the reporting standards set by the Inland Revenue Authority of Singapore (IRAS) and the Company Regulator ACRA.
Whether your Singapore company is active or dormant, all tax filings are compulsory. Failure to meet these deadlines can lead to fines and penalties including debarment of directors.
Reporting deadlines are triggered by the companies End of Financial Year. An example can be seen below and more detail can be found in our 3 minute guide to Singapore Company Tax Filings.
Incorporating in Singapore is a strong choice when deciding where to base yourself. A stable economy, strong global reputation, and business-friendly tax policies let you get up and running sooner – so you can spend less time tangled in admin and more time growing your business.
At Sleek we help people everyday to set up their businesses in Singapore. Talk to us for practical advice if you have any questions about incorporation.