You're not a startup if your company has been running for 10 years. You should have 10 years worth of financial statements, client lists, accounts receivable, product sales... in other words, a complete history of your company's activities. Do you have this? If yes, you're not a startup, but at least you have some proof that you have a live company. If not, you don't have anything.Scienide wrote: ↑Sat, 30 Apr 2022 1:39 pmHi all,
I have read lots of threads here that are related to my questions but didn't find a definitive answer so I'll try my luck and open my own.
I'm grateful in advance to everyone who will take their time to read it and share any thoughts/information.
We have a small IT startup that has been up and running for more than 10 years.
Unless you are running your company out of Antarctica or an unclaimed Pacific Ocean island, you are running your business illegally. Virtually every country in the world requires a company to be registered, at least as a sole proprietorship in your own name. Have you been filing tax returns in your country of residence for your company? Or at least for yourself as a sole proprietorship?Scienide wrote:The issue is that we never had registered officially as our country of origin is not very startup-friendly (and I'm not living there for the last 10 years anyway).
How does your company have a "reputation" if it's not registered? How did you get a bank account without having a registered business? Do you have a web presence? Who is listed as the legal owner of your business? Oh, wait... you're not registered, so how does anyone know who owns the business? Or are you just running this business in your name, getting paid in your name, and putting the checks into your personal bank account? And again, you say, "we". How are your profits being distributed amongst the owners? How are owners reporting their earnings on their personal taxes? You business owners are reporting your earnings for tax purposes, correct?Scienide wrote:Now we have an idea on how to greatly expand our business, using the existing user base and our reputation on the market to create something new.
How many investors are you planning on having? Singapore has a "private limited" company status which means no more than 50 investors and the stock cannot be publicly traded. How much capital are you planning on raising? Have you got firm letters of commitment from your investors that prove up your claims that you have ready investors?Scienide wrote:We plan to attract investments from the most professional of our customers and provide them with shares of the newly registered company. Preliminary discussions with some of them show interest and high chances of getting enough starting capital to achieve our goals and succeed with what we're planning to do.
Why do you think Singapore is such a hot place to form a company? Are you selling your goods and services in Singapore? Are you selling your goods and services in APAC and using Singapore as your jumping off point? If not, then why Singapore?Scienide wrote:So now we are considering different jurisdictions for incorporation.
Singapore appears to be one of the best for this, but after reading other threads here I'm having a growing suspicion that it won't work.
No, that is not correct. A private limited company in Singapore must have at least one "normally resident director". This means a citizen, a PR, or a person who has been issued an EP for the company and has the legal right to live and work in Singapore. So, yes, IF you can get an EP issued for you for your company, you can be the local director.Scienide wrote:What my initial plan was is registering a private limited company in SG, acquiring the initial capital through selling its shares to our investors, then hiring myself as a director and relocating to SG to manage the company. We plan to break even within a year and then get to profitability.
From what I've read:
1. We're going to need a local director. I'm not suitable for that role even if we hire myself as a director because the local director has to be a PR or a citizen. Is that right?
You are sort of correct on this issue. From about 1995 to around 2005 or so, it was very easy to form a company through the Entrepass scheme. You didn't even need to prove that you had money in the bank to start a company. As a result, every Tom, Dick, and Abishek abused the shit out of the system. No money, no experience in running a business, no skills... but it was a ticket to get the right to live and work in Singapore.Scienide wrote:2. Even if we hire a local director and succeed with creating a company, it's going to be a huge issue to get an EP for me to hire myself as a director, because from the MoM's PoV it's going to look like our only goal is to get an EP. So the only option if we go that way is to keep the hired director in full control of the company?
I have absolutely no idea what you are trying to accomplish here. Legitimize the company that you currently have that doesn't actually exist on paper? What would this accomplish? Surely there must be some evidence that you've had a working company for the 10 years that you state. Yes? No?Scienide wrote:3. There is another potential way - register a company overseas and then register a private limited company in SG with the sole shareholder being that overseas company. However, there are number of issues with that. First of all, it's going to look as sketchy (if not more) because the overseas company was just registered? Second, we won't be able to sell shares to our investors that way, we would have to do it from that overseas company and do most of the business through that overseas company, which kinda kills the entire purpose of incorporating in a more stable jurisdiction...
Again, why Singapore? Why not an LLC in the USA? Why not a private limited in the Netherlands?Scienide wrote:So should I get pessimistic and just accept the fact that it's not going to work?
Or is there anything I'm missing here?
Thank you for reading!
There is nothing illegal about running a business in your own name. It's called a sole proprietorship, and it is one of the most ancient business models in the world... since the beginning of time. You are a self employed person. In the USA you file Schedule C with your personal tax return. In Singapore you file form B or B1 depending upon how much money you earned.Scienide wrote: ↑Sun, 01 May 2022 11:43 amThank you for the detailed response!
1. Yes, you're correct, as far as I know it is illegal to run a business as an individual in my own name and receive payments to a personal bank account for that.
However, it was always very small because the target audience of the project is very small.
Under "we" I mean myself and my partner who was the author of the original idea of the project.
The thing is that we want to stop doing this business illegally and want to become an actual registered company.
As I said, there is nothing illegal about running your own business in your own name. What is illegal is failure to report income. You may or may not wish to answer that here but that is what matters.Scienide wrote:2. I also totally understand that since it was never a registered company the business doesn't exist from any government's PoV. I have no way to prove it was up and running and even if I provide the information like list of customers, their subscription payments with invoices in my name, bank account statements, etc. - it won't do any good for me as there is no official business registration... It'll rather show that I've been running a business illegally which is a major red flag.
As far as I understand it's better to not even mention that I was running that business before now.
The information I have provided in my OP was just a bit of a background.
I'm going to conclude my comments as follows.Scienide wrote:3. We don't have a reputation as a legal entity, but we do have a reputation as a team that is there for 10 years on the market and our customers trust us and many of them are willing to invest into our new project.
Our new project will have a much larger target audience and is related to the original project, thus we can use our existing IP (not patented but I guess we can fix that), expertise, customer base.
We can also use parts of our existing IT infrastructure (servers, software) to make the new project easier to launch.
4. I believe that we can stay within the 50 shareholders limit. Total capital we're going to raise initially is 500k-ish USD. That's kinda small, I'm aware of that, but according to our calculations it should be enough to launch our project.
We are working on a business plan at the moment and I definitely understand its importance. We won't do anything until it's done and we will do it properly.
We do plan to hire locals at some point in the legal and marketing areas as these are out of our area of expertise.
We are not targeted directly at the SG/APAC, but we plan to have customers from all over the world, primarily EU/US/APAC.
5. Answering the "Why Singapore?" part:
- we are not EU or US citizens so opening a company in the EU or US is going to be harder for us;
- as far as I know, tax burden in SG is reasonable;
- SG has a much more "transparent" government than that in our country of origin;
- I personally like SG a lot and has been there a number of times.
6. I wasn't even considering Entrepass because I've read a lot about it on these forums and it doesn't appear to be realistic to go that way.
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So, as far as I understand, if I wasn't acting as a legal entity but rather as an individual before now, I cannot prove that the business is real. And without an already functioning business it's pointless to even try getting an EP to our company no matter how much of investments we will attract?
And registering a company without getting an EP and keeping a hired nominee director in it is just plain dangerous as that director will have a full control over the company?..
No, basically it's about being an honest, legitimate business person. Paying taxes is part of that.Scienide wrote: ↑Mon, 02 May 2022 12:21 pmThank you for the information!
So basically it's about paying taxes for the income received as a sole proprietor and having solid documentation on what has been happening - information about customers, invoices, the product itself; then having a solid business plan and letters of commitment from the investors.
Color of my passport and what's written on it is certainly going to make it harder since I'm of Eastern Europe origin... But there are still chances as far as I understand.
Factors that increase the chances are the type of business (IT, not some local service but rather a global online service/platform/software) and the fact that we're going to hire locals at some point (that should be visible in the business plan).
Thank you again for your help!
That's exactly what we want to be.No, basically it's about being an honest, legitimate business person.
Thank you for the input!PNGMK wrote: ↑Tue, 03 May 2022 10:07 pmYou are not likely to qualify for a tech pass (min $20,000 per month salary).
You might want to find a partner here who you can work with to launch a company with (or merge your idea into) under a JV.
Not easy but at least they could get you an EP. Don't be too worried about the East European part. Plenty of Russians and Albanians here running pubs and the like (MD may be a little out of touch with that).
Thank you for the clarification!
Indeed, I am out of touch. It's been 9 years since I left the red dot.
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