Since May this year the Ministry of Manpower (the “MoM”) does not grant Letter of Consent (“LOC”) anymore for Dependent Pass (“DP”) holders to set up a Sole Proprietorship. This kind of structure was mainly used by DP starting a business in Singapore. This structure was the “mini me” of a Private Limited with an Employment Pass (“EP”). It was cheaper, easier, strait forward to set up and to register without needing any outsider within the structure.
This has now changed and it became more challenging to set up a business for DP holders. Which does not mean that is impossible for them to do it, but merely that they will need to plan further and structure it differently. It will also be more costly because they will need local assistance within the structure. Local assistance means someone who is a PR or a Singaporean citizen. These people can be someone the DP holder knows personally; an acquaintance; a local business partner or, in the majority of cases, a professional service provider. If the DP holder does not have a local business partner, I would recommend a professional because having someone you know – friend or acquaintance – could be cumbersome for them and can be uncomfortable for you. The process of setting up a business, then running it requires a lot of administrative tasks, filing requirements, signatures, and representation obligations. Not to mention the liability that comes with the business, although safe harbors can be implemented. Chose the option that would allow you the peace of mind you deserve to focus on your business and start growing from the outset.
When choosing the right option, DP holders need to take into account different elements such as their financial and personal situations as well as the services/products they are providing. There are different options available depending on these situations. That being said, the two main best options would be the following:
1. Sole proprietorship owned by a local (PR or SG citizen).
-> The local can be either a business partner or a professional service provider.
-> The local will employ the DP holder with a LOC.
-> The DP holder remains the beneficial owner of the business. This can be done by drafting the correct legal documents.
2. Private Limited with a local director (PR or SG citizen).
-> This structure requires further planing in terms of shareholding and directorship within the company to increase the chances of getting an EP for the DP holder.
-> At least a SGD 50’000.00 share capital structure.
This structure is much more expensive and require a much complex planing. Nevertheless, it is possible and sustainable on a long term basis if the DP holder wants to grow his/her business in Singapore.
Before choosing one of the options above-mentioned or any other structure according to any specific situation (personal, financial, business wise) it would be best to ensure the following first:
1. Find a local advisor who can assist you plan and implement your business according to local laws and regulations.
2. Have a service and/or product ready to enter and to serve Singapore market first.
3. Prepare a long term strategy to penetrate the local market and use the local talent and workforce.
4. Have an existing clients/customers base to develop the business.
5. Have some prospects in the business’s pipeline.
In conclusion, an authorization to work in Singapore cannot be guaranteed anymore for DP holders. Hence, the key is to plan in advance and strategize on a long term basis and get it done by professionals. Every case is different and should be discuss on a case to case basis. Nevertheless, awareness is the key to good and effective planning that will lead your business to grow successfully without any bump in the road.