Singapore SMEs 101: Your Starting Guide

Over the past two decades, Singapore has transformed into a vibrant hub for small and medium enterprises (SMEs) in the ASEAN region. Despite its compact size, the country excels in supporting Singapore SME growth and attracting global investors, thanks to its world-class education system, advanced infrastructure, and business-friendly policies.

As global interest in setting up SMEs in Singapore continues to grow, this guide is designed to be a straightforward, practical resource for anyone looking to establish a small or medium-sized enterprise in Singapore.

Known for its dynamic economy and appeal to international entrepreneurs, Singapore’s thriving SME sector fuels innovation, creates jobs, and strengthens the economy. If you’re planning to start or expand a Singapore SME here, this blog offers essential insights on why Singapore is an ideal base for SMEs, the steps to get your business up and running, and the key resources available to support your journey.

Quick Overview: Singapore SME 101

This guide is your quick-start roadmap for launching a Singapore SME. Here’s what you’ll find inside:

Why Singapore? Learn why Singapore is a leading SME hub with its business-friendly policies, skilled workforce, and access to Southeast Asia’s markets.
Choose Your Structure: Understand the three main business structures—Sole Proprietorship, Limited Liability Partnership, and Private Limited Company—to find the best fit for your goals.
Plan Your Finances: Get tips on budgeting for startup and operational costs, creating a contingency fund, and exploring funding options like bank loans, venture capital, and government grants.
Register & Launch: Step-by-step guidance on registering your business with ACRA and securing any necessary licenses.
Leverage Government Support: Discover the grants and initiatives available, like the Startup SG Founder Grant and Productivity Solutions Grant, designed to help your business grow.

Whether you’re just starting or looking to expand, “Singapore SMEs 101” provides practical steps and insights to set up your business with ease in Singapore’s SME-friendly environment.

What is an SME?

SME stands for Small and Medium Enterprises. SPRING (Standards, Productivity, and Innovation Board), part of the statutory board from MTI Singapore, defines SMEs as:

Companies with less than $100 million in annual turnover
Companies with less than 200 employees

The government supports Singapore SME development, empowering local businesses to thrive in a fiercely competitive global landscape. According to the Singapore Department of Statistics’s SME Report, as updated in September 2022:

There were little over 288,000 SMEs in Singapore.
SMEs make up 99% of all enterprises in the country.
The combined SME workforce employed 71% of the total workforce in Singapore.
Almost 20% of SMEs are foreign-owned entities.

The Role of Singapore SMEs

It’s astounding to consider that Singapore SMEs contribute nearly 48% of Singapore’s GDP while employing 3 out of every 10 individuals in the country. Their impact extends beyond economic growth, driving innovation, job creation, and providing high-quality goods and services at low prices in Singapore. Let’s explore the crucial roles played by Singaporean SMEs in five key areas:

Sustainable economic development: Singapore SMEs actively contribute to the long-term economic growth and stability of Singapore.
Job opportunities for locals: Singapore SME offers ample employment prospects, enhancing the standard of living for residents.
Attractiveness to foreign investment: SMEs are highly favoured by foreign investors, aiding in the expansion of the country’s foreign exchange reserves.
Catalyst for social improvement: SMEs promote social progress and foster innovation within Singapore.
Provision of high-quality goods and services at affordable prices: Singapore SME plays a vital role in delivering top-notch products and services to consumers in Singapore at competitive prices.

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3 Common Business Structures for Singapore SMEs

Before you embark on a business venture, selecting the appropriate business structure is a crucial step, as it aligns with specific objectives and varying needs. Drawing from our observations, we have identified three commonly adopted business structures by Singaporean SMEs.

Sole Proprietorship

Sole proprietorship is a business structure where an individual operates a small-scale business, retaining all profits but assuming personal liability for debts and losses.

If you are selling your own services, handcrafted items, or goods on a small scale as a single person, opting for sole proprietorship allows you to keep all the profits for yourself.

Plus, you will have the flexibility to set your own working hours, prices, and business strategies without having to consult with anyone else. Just remember, along with the freedom and control, you assume all the risks too.

Limited Liability Partnership

Moving up a notch, a partnership is a company that has 2 to 20 partners. It offers a unique blend of flexibility and protection where multiple individuals collaborate and wish to maintain individual autonomy while sharing resources and risks.

Suppose your craft has brought you some like-minded friends to set up a firm together. Forming an LLP would provide a suitable structure for you to combine your expertise and resources while limiting personal liability. Each partner can focus on their respective projects and enjoy the benefits of shared resources and a joint reputation. If one partner makes a mistake or faces legal action, the other partners will not be held personally responsible.

Private Limited Company

A Private Limited Company (PLC) in Singapore is a company that can issue shares and is regulated by the Capital Markets Act. Under the Private Limited Company Act, a PLC can have fewer than 50 shareholders, and all the shares are privately held.

Let’s say you have foreseen your potential to grow bigger in future. Establishing a private limited company offers advantages such as limited liability protection for shareholders. This means that if your company faces financial difficulties or legal issues, your personal assets will be shielded. Additionally, a private limited company structure allows you to issue shares, making it easier to attract investors and share ownership with employees as your business expands. ‍‍

What Qualifies as a Singapore SME?

Singapore’s vibrant SME ecosystem provides abundant opportunities for entrepreneurs. However, it comes with unique challenges that require a good understanding of the country’s specific SME requirements. Let’s delve into the three key qualifications for SME status in Singapore:

Local Singaporean residents must own at least 30% of the shares
The annual turnover of an SME does not exceed $100 million.
The Singapore SME has less than 200 employees on its payroll.

Why Start an SME in Singapore?

Singapore offers a robust infrastructure, efficient bureaucracy, and business-friendly policies. With a skilled workforce, favourable taxes, and extensive government support, launching a Singapore SME is highly accessible. Its strategic location also provides a gateway to Southeast Asia’s expanding markets, ideal for regional and international growth.

Preparing to Start Your SME

Crafting a Business Plan

Before navigating the registration process, a well-structured business plan is essential. This foundational document should detail your business goals, target audience, competitive landscape, operational strategies, and financial forecasts. Not only does a robust business plan serve as a roadmap for your business journey, but it also plays a crucial role in attracting investors and partners.

Budgeting and Financial Planning

A clear and realistic budget is critical to long-term success. Key budget components include:

Startup Costs: Initial expenses like registration fees, equipment purchases, and inventory.
Operational Costs: Ongoing expenses such as rent, salaries, utilities, and marketing.
Contingency Fund: A reserve for unexpected costs that may arise, providing a financial buffer.

If you need support with budgeting and financial planning, you can reach out to Grof for expert accounting and financial services tailored to your business needs. Grof Singapore offers a comprehensive suite of outsourced accounting and bookkeeping services in Singapore designed to support businesses at various stages of growth with experienced business advisors.

Our services include:

Bookkeeping: Efficient management of your finances with detailed monthly or annual bookkeeping services.
Financial Reporting: Concise financial reports provided monthly or annually to enhance your business decision-making.
Tax Compliance: Expert tax filing services are available to ensure compliance and peace of mind.
Payroll Management: Streamlined payroll services to save time and minimise errors.
Business Account Management: A free app featuring a business account, expense management, and a corporate card to help streamline your finances.

Grof positions itself as more than just an accounting service provider; we aim to be a trusted partner in your business growth, offering personalised attention and tailored solutions based on their deep understanding of Singapore’s market intricacies. Our team of financial professionals is readily available to assist you, allowing you to focus on strategic business development while they handle the financial details.

By outsourcing your accounting to Grof, you can potentially save time, reduce errors, and gain peace of mind, knowing that experienced professionals are managing your financial compliance.

Securing Funding

Various funding sources are available to support your SME:

Personal Savings: Investing personal capital shows commitment and reassures potential investors.
Bank Loans: While sometimes challenging, traditional loans can provide substantial initial capital.
Venture Capital: For innovative or high-growth ideas, venture capitalists like Antler offer funding and strategic guidance.
Crowdfunding: Online platforms like Funding Societies and Indiegogo enable you to gather public support and raise funds.

Step-by-Step Guide to Start an SME in Singapore

Starting any SME in Singapore requires mandatory registration with the Accounting and Corporate Regulatory Authority (ACRA). Here is the breakdown of the Singapore SME registration process in the country:

Reserve your business name

Use our company name check tool to search for available names
Once you’ve selected your desired name, you can register at BizFile+ for $15.
ACRA reserves your business name for 120 days once it’s approved.
If you don’t register your business within this period, the name will expire and become available for other companies.

Register your residential address

During registration, ACRA requires company officers and owners to provide their residential addresses, which can be accessed by consumers purchasing company reports. If you prefer to keep your residential address private, you have the option to use the “Alternate Address” for a fee of $40.

3/a. Register your business address (for Sole-Proprietorships)

For sole proprietorships or partnerships, it is essential to register your business address, which will serve as the location for your business activities.

If your business qualifies for the Home Office Scheme, you have the option to use your residential address instead of a commercial one. However, keep in mind that you will need approval from HDB or URA, depending on your circumstances, before choosing this option.

3/b. Register your office address (for LLPs and PLCs)

The registered office serves as the official headquarters of an LLP or company, responsible for receiving and managing all official correspondence. While it’s ideal for the main place of business to coincide with the registered office, it’s not always mandatory.

Submit your application to ACRA

Once you have all the required information, you will need to submit it to ACRA along with the expressed consent of all owners or authorized representatives to finish the approval process.

Receive your Unique Entity Number

Upon successful registration, your Singapore SME will be assigned a Unique Entity Number (UEN) by the system. The UEN is a unique identification number necessary for any SME engaging with government agencies. It serves as proof of legitimacy for your business.

Get your licenses and approvals

Before legally operating your business in Singapore, you might need licenses or approvals from other government agencies. To determine if you need any for your business type, check out GoBusiness Licensing. If no additional permits or licenses are necessary, you can start operating as soon as you receive your UEN.

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SMEs Government Initiatives in Singapore

Singapore stands out as one of the most SME-friendly countries in the Asia Pacific region, largely due to the efforts of the Association of Trade and Commerce (ATC). The government has put in place favourable tax policies to fuel entrepreneurship and foster growth. Coupled with robust economic progress leading to low unemployment and high GDP per capita, Singapore offers an ideal environment for business endeavours.

In the final section of this guide, we’ll walk you through some of the significant SME grants available in Singapore, helping you kickstart your business journey with confidence.

Startup SG Founder Grant

The Startup SG Founder programme empowers first-time entrepreneurs to kickstart your own business by offering mentorship and up to SGD 50,000 financial assistance.

With SSGF, you can access a startup grant and receive guidance from Accredited Mentor Partners (AMPs). They’ll provide you with pitch training to nail those investor meetings and connect you with potential investors and corporate partners. On top of that, you’ll get secretarial and accounting support, along with exclusive access to special programmes.

The scheme is open for all Singapore Citizens (SC) / Permanent Residents (PR) as long as they meet certain conditions below:

At least 2 SC/PR who :

Are first-time founders

Are key decision-makers and contribute meaningfully to the company

Are not employed externally and able to commit to the business full-time

Have undergone entrepreneurship training academically

Hold equity in the company, with a minimum of 30% collectively

The company must:

Not received funding from any other government organization before (for the same idea).

not have previously received the SSGF grant.

Have at least 51% of issued shares are owned by SC/PR

Be registered as a private limited entity in Singapore for less than 6 months

Invest a co-matching amount of S$20,000 as paid-up capital on ACRA

Have at least $10,000 as paid-up capital on ACRA at the point of application to EnterpriseSG.

Not have a proposed business idea that falls under the list provided below:

Cafes, restaurants, nightclubs, lounges, bars, foot reflexology, massage parlours, gambling, prostitution, social escort services, employment agencies (including recruiting foreign work permit holders and workers/support staff, relocation services, and manpower services), and geomancy.

Enterprise Development Grant

If you’re in the food and retail service sectors and seeking funding to innovate, improve, or expand overseas, the Enterprise Development Grant (EDG) is the first grant you should consider! The EDG provides support to businesses, helping them evolve across three crucial areas:

Innovation and productivity

Improvement upgrades

International ventures

Starting from 1 April 2023, you can get up to 50% support for eligible costs through the Enterprise Development Grant (EDG). If you’re working on sustainability-related projects, you may even be eligible for up to 70% support from 1 April 2023 to 31 March 2026. It’s a fantastic opportunity to give your business a boost and make a positive impact.

Productivity Solutions Grant (PSG)

Launched in April 2018, the Productivity Solutions Grant (PSG) supports businesses in adopting technology to boost their operations. It provides financial aid for implementing targeted IT solutions, equipment, and consultancy services that enhance productivity. These solutions align with industry roadmaps such as the Industry Transformation Maps (ITMs) and Industry Digital Plans (IDPs).

To be eligible for PSG, businesses must meet the following criteria:

Be registered and operating in Singapore.

The purchase, lease, or subscription of the IT solutions, equipment, or consultancy services must be utilized within Singapore.

For selected solutions, have a minimum of 30% local shareholding.

For consultancy service solutions, have at least three local employees at the time of application.

Enterprise Innovation Scheme

Following the announcement from the Singapore Budget 2023, the government newly introduced the Enterprise Innovation Scheme, which is designed to assist businesses in the city-state to enhance their innovative capabilities and develop groundbreaking products.

But that’s not all! It also offers financial support for research and development, technology adoption, and other innovation-related activities. On top of that, businesses can enjoy up to 400% tax deduction for engaging in these activities:

Research & Development (R&D)
Acquisition and licensing of Intellectual Property Rights
Intellectual Property Registration
Training & Skills Upgrading
Innovation projects carried out with polytechnics and ITE

Wrapping Up

Singapore has an amazing economic scene with a high degree of economic freedom. It’s one of the strongest economies worldwide! The government truly understands the importance of fostering entrepreneurship and is always finding ways to make it easier for new businesses to set up shop. That’s why we see so many SMEs thriving in this SME-friendly environment, holding their ground against international competitors. If you’re new to the business journey and find the idea of incorporating a new SME in Singapore a bit daunting, don’t worry! We are here to turn it into a seamless and hassle-free process just for you!

Launch Your Singapore SME with Grof: A One-Stop Solution for Success

If you’re ready to start a Singapore SME, Grof is here to make your business journey smooth and efficient. With a dedicated team offering a complete suite of services, Grof streamlines company incorporation, accounting, and corporate secretarial needs, freeing you up to focus on growth.

Why Choose Grof?

Quick Incorporation: Grof can have your company up and running in just 1 to 3 days, managing all compliance and registration requirements with ACRA.
Comprehensive Accounting: Our outsourced accounting services cover essential tasks such as bookkeeping, financial reporting, tax filing, and payroll management, ensuring that your finances are compliant and well-organised.
Corporate Secretarial Expertise: Grof’s corporate secretarial services handle all compliance requirements, including timely filings, regulatory updates, and corporate governance tasks, so you stay on track effortlessly.

With Grof’s all-inclusive support, you can concentrate on building your Singapore SME while we manage the administrative complexities. Let Grof’s expertise provide peace of mind and more time to focus on growing your business.

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