Demystifying the Letter of Consent and setting up a Pte.Ltd

[screns]

Trying to set up a private limited company where my spouse (currently on an EP) will be the sole director and shareholder and then will employ me through a letter of consent. I have tried to get the rules straight from MOM before approaching an accountant, but every time I call I get a different story. One MOM officer said I can do the above. Later a second said that if the EP holder is a "non-sleeping director/shareholder", meaning can sign cheques, and can apply for a LOC for me, then they have to apply through Entrepass, which is obviously a much bigger proposition. I am trying to keep this as low-cost and straightforward as possible and was hoping that I could simply have my husband as the director (his present workplace would have no issues with him being a director of this new company) and me working on an LOC, and that's that. Anyone know what the actual rules are? Thanks.

[sundaymorningstaple]

Have you bothered to read the relevant stickies already on this forum regarding same?

[screns]

I have read the stickies, but the rules seem to keep changing, at least that's what I am led to believe with every MOM conversation I have, so wasn't sure if the answers would be applicable. However SMS, from your post, seems like the info would be up-to-date, so let me scour again. Thanks.

[screns]

Plus the stickies seem to deal with questions about a sole proprietorship, not my particular situation.

[Strong Eagle]

The key takeaway from the threads that SMS mentioned are:

a) It is possible to get a LOC for your own company (pte ltd) or sole proprietorship.

b) You will get different answers from different people. It would appear that MOM and ACRA don't necessarily see eye to eye with respect to what a person with a DP can or can't do.

c) It may be harder at this time, although you will note a recent post likened getting the LOC to a "piece of cake".

d) SMS and I have had disagreements over the meaning and intent of various web pages... although we are mavens of the issues and not experts with inside tracks to government authorities.

My view: It will be easier for you to get a LOC, in terms of getting approvals, to set up a private limited rather than a sole proprietorship. But, I would not involve your EP bearing husband in this... you should do it yourself as a DP.

My reasoning is this: Although people have gotten a LOC for a sole proprietorship, there is this gray area. You must have an LOC to work. Yet before you get a LOC, you form a SP and then "work" for it to apply for a LOC. But apparently this has not hindered some from getting it done in this way.

Your first step in getting a LOC is to form your private limited. First, according to the ACRA web pages, "Any person above the age of 18 years old with effect from 1 March 2009 can incorporate a local company." Therefore, you as a DP can incorporate a company, and in fact, can use Bizfile to do so. I assume you have your SingPass or will pick one up shortly.

http://www.acra.gov.sg/Company/Starting ... ompany.htm

Next, the question of directors arises. The ACRA states, "A company must have at least one director who is an “ordinarily residentâ€Â

[JR8]

^ Jeez, class reply there Eagle.

That's got to be $1,000 worth of professional 1-1 advice, if it were done face to face.

[screns]

Strong Eagle, many thanks for the detailed reply. The problem has been that nobody at MOM or ACRA has given me a straight answer, it changes every time, even from one week to the next. Will follow your advice and let you know how it goes.

Thank you.

[Strong Eagle]

Think about it this way... it's a case of bureaucratic cognitive dissonance.

On the one hand, you have the Singapore government wanting to show that Singapore is an easy place to set up and do business. So, just about anyone can incorporate a business. But, this is really oriented to a company outside of Singapore, and Singapore citizens and PR's. They weren't really thinking about DP's, or for that matter, LTVP or LTVP+.

On the other hand, they can't really block a DP holder because there are no specific restrictions against DP holders, so instead, they "discourage" by saying "cannot". You really should log into ACRA and see if your FIN # will be accepted by the "register new company" screens and forms. You don't actually register until you get to the very last button, so you should be able to verify that there are no system issues with ACRA. If there are, you will need to go in person and get it straightened out.

Remember, this has been done before.

[Elly Mac]

Hi there

I know this is quite an old thread now but I was wondering how you got on with the DP LOC PTE LTD application Screns?

I'm looking to set up either a PTE LTD or a SP and have read all the info on this forum with great interest. I've read about a lot of 'success stories' of people getting their LOCs for SPs approved, but my preference would definitely be to set up a PTE LTD.

Just wondered if anyone has had any recent experiences with LOCs for PTE LTD vehicles?

And Strong Eagle, thanks so much for all the detailed info you've provided, it's really much appreciated!

[sundaymorningstaple]

Do a search of the forum, you will find several thread where both new Pte Ltd AND SPs have been formed by DPs and LOC's applied for successfully.

Probably the best thread to read (all 7 pages of it).

http://forum.singaporeexpats.com/ftopic75000.html

[Elly Mac]

Hi there sundaymorningstaple

Thanks so much for the quick reply, much appreciated. Yep I have already read everything I can get hold of (including that giant thread with now 8 pages!), but almost every story I've seen is about the formation of a SP not a PTE LTD.

There was one example contributed by colio but he mentioned that the rules may have changed such that a company has to have at least one local employee before being able to sponsor a DP LOC. I haven't been able to find any more info on this online so I really just wanted to see if there was anyone out there with any recent experience of this.

My situation is a little different in that my husband (on an EP) and I are waiting to hear whether our PR application will be successful or not. I hope I'm not incorrect, but I believe that as a DP holder, I can set up a PTE LTD as the sole director and shareholder and have my husband (EP) act as the company secretary. Then once our PR application is (hopefully) accepted then I can work for this company with no problems. It's just in the meantime I'm not sure whether I should apply for the DP LOC for a SP or go straight for the PTE LTD that I eventually want to set up. I'm not trying to play the system in any way, just trying to figure out the most efficient way of structuring while waiting to hear about our PR application.

I thought from the titles of the threads that this would be the best place to ask but maybe I should have added to the 8-pager. I'm not sure about the etiquette of duplicate posts - should I just head on over to the other thread and ask there too, do you think?

Also I'm very happy to share my experience once I've figured this all out. These forums really are incredibly helpful.

Thanks in advance to anyone who could help!

[sundaymorningstaple]

No need to duplicate post. I've moved the entire thread to the Business forum.

When Strong Eagles sees it he'll surely pipe in as he is the general business guru on the forum.

[Elly Mac]

Fantastic, thank you!

[Strong Eagle]

Hi there sundaymorningstaple

Thanks so much for the quick reply, much appreciated. Yep I have already read everything I can get hold of (including that giant thread with now 8 pages!), but almost every story I've seen is about the formation of a SP not a PTE LTD.

There was one example contributed by colio but he mentioned that the rules may have changed such that a company has to have at least one local employee before being able to sponsor a DP LOC. I haven't been able to find any more info on this online so I really just wanted to see if there was anyone out there with any recent experience of this.

My situation is a little different in that my husband (on an EP) and I are waiting to hear whether our PR application will be successful or not. I hope I'm not incorrect, but I believe that as a DP holder, I can set up a PTE LTD as the sole director and shareholder and have my husband (EP) act as the company secretary. Then once our PR application is (hopefully) accepted then I can work for this company with no problems. It's just in the meantime I'm not sure whether I should apply for the DP LOC for a SP or go straight for the PTE LTD that I eventually want to set up. I'm not trying to play the system in any way, just trying to figure out the most efficient way of structuring while waiting to hear about our PR application.

I thought from the titles of the threads that this would be the best place to ask but maybe I should have added to the 8-pager. I'm not sure about the etiquette of duplicate posts - should I just head on over to the other thread and ask there too, do you think?

Also I'm very happy to share my experience once I've figured this all out. These forums really are incredibly helpful.

Thanks in advance to anyone who could help!

I've thought about this for a couple of days and I am now ready to respond. I don't really understand how your situation is different. Until and when you get your PR, you must operate under the rules of EP/DP. I suppose that if you have a successful business under a LOC under a DP that maybe it would help your PR cause, but other than that, your situation is not different, it is identical to any other person who wants to start a business on DP.

Second, you can form a pte ltd as the sole shareholder. But here is where it becomes more complicated. If you were to be the sole director, you would be the managing director, and that means you would be working for the company, and that means you need to have a work permit. You could potentially be an outside director, but really, who is going to believe that?

Therefore, most people who set up a pte ltd engage a nominee director, who, for a fee, agrees to be the director of a company. She then immediately applies for an EP for you, and when you receive it, she resigns. The other alternative is to have the newly formed company apply for a LOC for you.

Which is better? I dunno. If you have a real track record in what you want to do, maybe the EP. This gives you complete independence from your husband, and my sense is that this only gets approved with a real, viable business plan. If not, maybe the LOC because then they know you are time limited by your husband's EP, and are more willing to allow the business to hire you... but see more below about sole proprietorship.

As for having your husband as the company secretary... I really don't know because my direct line into the heart of the ACRA and MOM has been disconnected... but I don't think this will fly. If your husband is not a director of the company, then he must meet certain requirements, such as being a registered CPA, in order to be a company secretary. But, if your husband attempts to become a director in order to be a secretary, then he faces the same problem as you... hard to convince the authorities that he is an outside director when he is also the company secretary, he must have a work permit to be an inside director, and he cannot hold more than one EP. So, you need a separate secretary.

My view is that in the long haul, forming your pte ltd is the better route to take even though it is more costly and time consuming. My view is that you have more "gravitas" with the authorities, and that they will view you as more serious about your business. (See also my threads about providing sufficient documentation to get your EP granted).

When it comes to sole proprietorship, I am somewhat surprised that the authorities have allowed this to happen. Look at it this way. You apparently can form a SP so long as you have your Singpass but you can't work for it until you have your LOC. But since you don't have your LOC, there is no one working for the company that could actually apply for your LOC, nor technically, is there an active manager. Yet, the authorities have both allowed the company to be set up (the rules do allow this), and they have granted a LOC.

Finally, you have referred to a supposed requirement that a Singapore business have at least one employee. There is zero that can be found about this on the web... if anyone knows about this anecdotally, please chime in. The fact is all LOC applications require a business to state turnover, number of employees, etc, and from the various posts I have seen, having zero turnover, no employees, and no fixed wage have not been a hindrance.

Bottom line: I've not been much help. If I were you, I'd asses the viability of my business and create a proper business plan that would get me an EP. Next, I'd settle for a LOC if I thought my plan was weak. I'd go for a sole proprietorship only if I thought my chances were really low, mainly because it is cheaper to set up.

[Elly Mac]

Hi Strong Eagle

Thanks so much for this detailed reply, it is much appreciated. And sorry for the slow response, I was travelling over CNY.

It is a viable business and I'm just finalising my business plan etc now. I think my best bet might be to engage a nominee director like you suggest, and then have the company apply for a LOC for me to work. MY DP is valid until the end of the year, by which point we will hopefully have PR. And it definitely sounds like it would be easier to get the LOC than the EP.

I did not realise that the Company Secretary had to be a CPA, I thought for a private company they just had to be 'ordinarily resident' in Singapore?

I'll have a look at your threads re EP applications too - would be useful for the LOC application too I guess.

Thanks again!