Despite being the second smallest country in Asia, the Republic of Singapore boasts a high standard of living, developed transportation infrastructure, and the top ranking on the 2022 Index of Economic Freedom.
Starting an online business in Singapore is therefore an appealing notion due to the city-state’s conducive business environment, geographical location, and advanced science and technology.
In this article, we’ll go over the steps of starting an online business in Singapore. We’ll also talk about why you should build an e-commerce business in Singapore, points to note and FAQs.
- Why start an online business in Singapore?
- Starting an online business in Singapore: A step-by-step guide
- Why should you register a web-based business in Singapore?
- FAQs for starting an online business in Singapore
- Some last words
Why start an online business in Singapore?
There are so many places in the world where you can start an online business. One’s home market, for example, is usually the most popular choice for first-time entrepreneurs.
If you’re foreign to Asia’s Lion City and looking to establish a business there, then you’re probably looking for quantifiable evidence and reasons to confirm your instincts that Singapore is a great place to build an e-commerce business.
So here it is. Below are three reasons why you should start an online business in Singapore.
1. Prime location and eager investors
As a global city in Southeast Asia, Singapore not only has access to the rest of the Asia Pacific region, but Europe and the Americas. In fact, Singapore is the third largest Asian investor in the European Union, trailing closely behind Japan and Hong Kong.
The city-state is also one of the favorite destinations for European investors seeking to expand their reach overseas. Singapore is therefore an ideal breeding ground for those hoping to start an online business in Asia.
2. Tech-savvy talent and culture
With a handful of world-leading tertiary institutions, such as the National University of Singapore and Nanyang Technological University in Singapore, local businesses can choose from a wide pool of competitive talent.
Viewed from a bottom-up perspective, Singapore also has a tech-savvy population. Residents there are well-versed in the use of the Internet for everyday tasks, ranging from bill payments, shopping, and the ever-present social media.
As regards the online behavior of Singaporeans, around 3.3 million people in the city-state are online shoppers. Revenue generated by the e-commerce market in Singapore is estimated at $7.29 billion in 2022.
Translating numbers into insights, the Lion City provides you with a market that already has an ingrained culture of tech-savviness and a positive attitude towards online shopping, making it a prime location for setting up an online business.
3. Great government support
As part of the initiative to drive digital transformation in Singapore, the city-state’s government offers much support to local businesses, especially those venturing into industries related to science and technology.
With the GoBusiness portal launched in 2019, for example, the government has made it simple for business owners to set up an online store in the city by keeping the costs of business registration relatively low and straightforward.
Additionally, all properly registered businesses in Singapore can avail of appealing tax rates and even occasional tax exemptions that help them maximize their profit margins.
Starting an online business in Singapore: A step-by-step guide
Although you don’t have to worry about leasing a space or managing a physical storefront, starting an online business is no walk in the park.
There are issues like funding, taxes, and legal matters that you’ll need to take care of, and the sheer idea of dealing with these may give you a headache.
To make things simpler for you, here’s a step-by-step guide on how to start an online business in Singapore. Stick to the checklist below, and you’ll find yourself right on track to opening an e-commerce store!
Step #1. Plan and decide
Naturally, you must first decide on your products, target customers, and how you’ll deliver those products to your customers. This first stage is where you research, plan, and ultimately settle on the nature of your business and how you wish it to form.
Market research plays a key role at this stage, as you can ascertain any potential competition and trends to gauge your potential competitiveness in your niche.
In the planning phase, a few ideas you may want to consider are:
- What’s trending now?
- What products will you offer?
- How will you price your products?
- Who will your suppliers be?
- How will you ship your goods?
- Is your product niche enough?
You can compile all these ideas into a business plan and move on to step 2, where you’ll be looking for ways to fund your ideas and get the ball rolling further.
Step #2. Get business funding
Now that you’re clear on your idea, you can start selling it to get some capital for your business.
You may choose to put up your own money to start your business (i.e. bootstrapping), but securing funding from external sources helps minimize your risks, and gives you further support and guidance.
Discussed below are some ways that you can seek e-commerce financing. They’re business loans, investors and government grants.
2.1 Business loans
As a global financial hub, Singapore has a wealth of commercial banks that offer low-interest bank loans you can turn to. You can get an initial cash injection into your business, and repay them later in accordance with a schedule set by the lender.
Submitting loan applications to various banks and comparing their offers would be the way to go in this situation, but doing some initial research into the conditions of each bank can help you select which ones you really wish to go with.
HSBC Singapore, for instance, offers financing for small and mid-sized enterprises with one of their loans having a value of S$300,000 with a maximum interest rate of 5.5% per year. DBS, on the other hand, offers a similar plan worth up to S$500,000 with a repayment period of 1 to 5 years.
You must nevertheless be cautious when dealing with business bank loans. In the event that things don’t go according to plan, your online business may not break-even or profit, and you will be liable to debt too.
Investors come with much lower risks of debt, but they often come with different types of non-pecuniary responsibilities.
In exchange for funding, investors may demand ownership of a portion of your business. Board seats may also be requested so you lose the steering power over major business decisions. These are especially common when you raise funds from angel investors and venture capital.
2.3 Government grants and aid
Alongside funding from the private sector, the Singaporean government likewise has a variety of grants, financial aids and funding for your online business in Singapore.
First-time entrepreneurs, for example, can apply for the Startup SG Founder Grant that comes with a startup capital of S$50,000 and mentorship.
If your business is already registered, you can look into the Enterprise Development Grant (EDG), which is open to SMEs currently registered and operating in Singapore and have at least 30% local shareholding.
Step #3. Incorporate the business, and make things official
In Singapore, business structures are grouped into five main types:
- Sole proprietorships
- Limited partnerships (LPs)
- Limited liability partnerships (LLPs)
- Private limited companies
You can read more about each of them on the GoBusiness website.
To incorporate your business, you’ll first need to decide on one of the structures, and follow the relevant requirements to complete your incorporation paperwork, including:
- Company name: Prepare three names for your business, as your first or even second choice may be unavailable.
- Registered Singapore address: This is what you’ll register as your business address in Singapore that can accept correspondence, notices, mail, and other materials. If you don’t have an office, you can rent virtual offices or use your home address since P.O. boxes aren’t accepted.
- Directors: You can have one or more directors, so long as you also have at least one local director. If you aren’t Singaporean, you’ll need at least one director who is a Singaporean or permanent resident of Singapore. Some companies offer nominee director services to help you satisfy this requirement.
- Company secretary: You must also appoint a company secretary who will manage all the books, documentation, and sometimes the tax filings of your company to ensure that your business complies with all the local laws and regulations.
- Company constitution: Your company constitution indicates your primary purpose as a business, its ownership structure, and the amount of paid-up capital you have (S$1 is actually sufficient for the said capital).
- Proof of identity: Passports, universal identification cards, or other key IDs are needed to prove your identity and contact details are true. If you’re a foreigner, you’ll likewise need to provide proof of address for yourself and other key officers in the company (these can be in the form of bank statements or utility bills).
After compiling all this information, you can submit your application to the Accounting and Corporate Regulatory Authority (ACRA) of Singapore, along with the application fee of S$315. This fee covers the company name reservation (S$15) and business registration (S$300).
Application processing typically takes only a few hours, so how long it takes you to gather the information usually determines how long the overall business registration will take.
Step #4. Establish your e-commerce infrastructure
Once your business has been registered, you’ll need to build an infrastructure that you can use to conduct your business.
4.1 Online infrastructure
Typically, the online infrastructure for an e-commerce business consists of (1) a website where you can sell your goods, (2) software that helps you manage online orders, inventory and marketing, and (3) a payment system for you to get your dollar bills.
Of course you can purchase your own domain and hire someone to build an e-commerce website. However, a wide array of e-commerce solutions are already available in the event that you don’t want to shell out extra cash to build one from scratch.
Some of the popular e-commerce marketplaces in Singapore, such as Lazada and Shopee, are where you can easily set up an online storefront and start selling in just a few days.
Alternatively, you can make use of e-commerce platforms like Shopify and Shopline to build your own e-commerce site. Solutions of this type usually come with a range of e-commerce-adjacent features and functionalities.
Shopify, for example, offers payment services for digital merchants to easily accept payments online. It also provides apps and integration options to facilitate customer communications, such as through Facebook Messenger and email marketing.
4.2 Open a business account
Once your e-commerce infrastructure has been sorted, you’ll need to open a business account where your earnings will go. There are two places where you can set up a business account: online or in a bank.
If you opt for the traditional route, you can find a bank and set up an account there. In this respect, HSBC, Citibank, DBS and the United Overseas Bank (UOB) are popular options for digital merchants in Singapore.
The hassle of queuing at a bank and going through all the paperwork, however, makes the virtual counterpart of business bank accounts more appealing.
With business account solutions from fintech platforms such as Airwallex, Payoneer, Neat or Wise (formerly TransferWise), you’ll be able to make and accept payments, and get corporate credit cards if you wish.
Step #5. Remember your tax reporting deadlines and government requirements
Remember the taxes we mentioned? Well, each year, you need to report your profits, due taxes, and other pertinent information to both the Accounting and Corporate Regulatory Authority and the Inland Revenue Authority of Singapore (IRAS).
Tax filings are required of every Singapore-registered company, and those who evade taxes intentionally or unintentionally can be liable for up to 200% of the undercharged tax and several years in prison. Directors may even be disbarred from ever holding a directorship in another company again.
The financial year end is pegged on the 31st of August every year, and you’ll need to submit your estimated chargeable income (ECI) no more than 3 months after that time. Your ECI is your firm’s taxable income, and is often filed by your accountant.
You then need to hold an annual general meeting (AGM) no later than the 31st of December in the same year, where you’ll present your financial statements to your shareholders and have them signed. The AGM, along with your Annual Returns, should be prepared by your corporate secretary.
Last but not least, your Form C or C-S is another filing standard for your taxes that should be prepared by your accountant on or before the 30th of November after the financial year end.
Why should you register a web-based business in Singapore?
Although you could very well forgo registering as a business in Singapore and still do quite well, there are a handful of benefits for registering a web-based business in the city-state. Below are three of them.
1. Avail of better tax rates
To start off, you could maximize your gains by availing of better tax rates through a registered company.
To illustrate this, the Inland Revenue Authority of Singapore, which is in charge of all tax matters in the city-state, typically charges incorporated businesses 17% on their taxable income, whereas an individual is subject to a higher personal income tax rate of 22%.
Additionally, there are even more tax benefits such as partial tax exemptions and progressive rates, which are only available to registered corporations.
2. Protect yourself from liabilities
Registering your business in Singapore also allows you to create a juridical entity separate from your own estate.
This essentially means that you and the company are independent of one another in your respective liabilities. Your personal holdings aren’t connected in any legal way to your company’s assets, vice versa.
This way, you won’t be personally responsible for any debts or losses the company may incur, and the company itself would be unlikely to suffer in the event you have any personal debts, lawsuits, or losses.
3. Obtain support from the government
Being a properly registered web-based business enables you to utilize a variety of e-services and schemes offered by the Singaporean Government.
You can, for instance, obtain licenses and apply for corporate support schemes and even reserve a maximum of five website domain names for your business that end with .sg or .com.sg.
These licenses and domain name suffixes provide a sense of legitimacy and reliability to your business, helping you gain the trust of your online customers.
FAQs for starting an online business in Singapore
Should you run the business as a sole proprietor, partner or part of a limited company? Do you need to be physically present in Singapore to establish a business there?
These are questions frequently asked by those who are new to the Singapore business landscape, and this section has the answers for you.
1. Do I need to register my online business in Singapore?
The short answer is yes, you need to register your online business in Singapore, according to section 5 of the Business Names Registration Act (BNRA).
Registration must be done with the Accounting and Corporate Regulatory Authority, which requires, with some exemptions, that anyone carrying out an activity continually for profit to register a business.
2. Which business structure should I choose?
As mentioned earlier, Singapore offers five different types of business structures. For those who are starting an online business for the first time in Singapore, incorporation as a private limited company (Pte Ltd) is a starter’s choice.
The said type of business structure offers considerable, if not the best, tax advantages along with limited liability. The company exists as a legal entity, thereby protecting you personally from being liable for any debts or even lawsuits the company may be answerable to.
2. Do I need to be physically present in Singapore to incorporate my company?
No, you don’t need to be physically present in Singapore to complete the incorporation process.
If you’re staying overseas, you can hire one of the many local fixers or firms that help with company incorporation services, and you can coordinate with them through email, fax, or your preferred online communication method.
Nevertheless, creating a corporate bank account in Singapore may not be easily done online. Some banks require a physical presence when you open a new account, so researching which banks provide the most convenient options for you is a must-do.
3. Are there any other rules and regulations I should follow?
e-Commerce businesses in Singapore aren’t typically constrained by strict and demanding government requirements and ordinances. There are nevertheless certain regulations in place to protect consumers, other businesses, and the Singaporean business environment as a whole.
Keeping these rules and regulations in mind would therefore be crucial to ensure that you can smoothly run your business without running into problems with the law later on.
For instance, you generally don’t need a license to sell your products online in Singapore, but those who provide broadcasting services or computer online services are required to obtain a license from the Singapore Broadcasting Authority.
Similarly, online shops dealing with secondhand goods must secure a license from the Deputy Commissioner of Police, according to the Secondhand Goods Dealers Act.
4. Can I easily expand my online business to other places near Singapore?
Yes, you surely can! As mentioned earlier, Singapore is one of the favorite trade ports and business centers for investors worldwide. The city-state’s geographic location grants easy access to most parts of Asia, and it has close ties with the Chinese market as well.
The online nature of your business allows you to capitalize on Singapore’s location and look to the horizon, instead of limiting yourself to only serving Singapore’s approximately 3 million online shoppers. When your online business is ripe for cross-border e-commerce, just go for it.
Some last words
Doubtless, a global financial hub with one of the world’s most robust tech and IP protection is where you’d want to go to set yourself up for success.
If you’re thinking about establishing an online business in Asia, the Lion City clearly offers the optimal setting for your e-commerce store. Now that you’ve read all about how to start an online business in Singapore, you can go on and do just that.
But if you’re looking for more resources and insights for running an e-commerce business, then Choco Up can help!
As a global technology and financial services platform, we not only offer revenue-based financing — a type of flexible, zero-equity funding — for digital merchants and startups. We also provide a wide array of how-to articles and business growth solutions for our clients.
Whether you’re just starting out or trying to grow an e-commerce business, Choco Up can always be your trusted funding and growth partner. You can learn more about our funding here.
About Choco Up
Choco Up is a global technology and financial services platform, offering revenue-based financing and business growth solutions for digital merchants and startups.
With data analytics and machine learning at its core, Choco Up employs vast integrations to automate fund deployment, providing fast-growing companies with zero-equity funding in a quick and seamless manner.
We currently have offices in Singapore and Hong Kong and serve clients worldwide, providing smart-growth analytics and global payment solutions to fuel their growth.