Best legal entity and visa for new consulting business?

[sdd80]

Hi everyone, I'm looking for some advice on starting a business in Singapore.

I'm a dual UK/US citizen currently residing in the UK. My business partner is a UK citizen, living in Singapore for 2 yrs on P1 EmploymentPass and currently starting the PR process.

The business will be a niche management consultancy offering services to large energy/commodities companies and banks. We expect that it will take us a few months to secure our first set of contract(s) and it's important to us that we both become active in the business at the same time and engage in business development activities as a team.

We envision the starting steps as follows:

1) Partner gets PR
2) Establish SG-based legal entity of which we are 50/50 partners (either LLC or LLP)
3) Deposit some start-up capital (which we'll use to pay ourselves nominal salary) - amount TBD on recommendations
4) I start application process for EntrePass or EmploymentPass

It seems to me that my Entre/Employment pass is the most challenging part as the business will be brand new, with no revenue or contracts.

I'm looking for recommendations on the right legal-entity, start-up capital etc to increase the chance of success for Entre/Employment pass.

From a business point of view we currently favor an LLP due to its relative simplicity over LLC. My research has concluded that the long-term (post yrs 1-3) tax advantages of LLC over LLP are minimal. Over about $300k the corporate tax of 17% is only 3% lower than the personal income tax of 20% however the added administrative and audit costs of running an LLC will reduce that 3% advantage even further. Please do correct me if you think I've got this wrong or missed something.

I'm aware that for EntrePass LLC is the only option, and that the requirements are becoming much stricter from Sept 2013, as well as the minimum local employee requirements at time of renewal. On that basis, I favor the EmploymentPass, assuming that the chances of approval are at least equal to the EntrePass.

Am I allowed to be an active partner and EmploymentPass holder of an LLP?

Does an LLC have any benefit over LLP when it comes to my EmploymentPass application?

What is the recommended start-up capital that we should show in the bank account?

Can I indicate the required salary for P1 and after approval not actually pay myself that salary? I was advised by someone that the authorities don't check this on an on-going basis but only at renewal and as long as you eventually started receiving a good salary the renewal should be fine.

If that is true, if we show start-up capital equal to 3-6 months of my intended monthly salary will that be a sufficient amount?

Thanks in advance for your help.

[Strong Eagle]

Have you been through these threads?

http://forum.singaporeexpats.com/ftopic93619.html

http://forum.singaporeexpats.com/ftopic78558.html

[sdd80]

No, I hadn't seen these threads (though have done quite a bit of digging in the forum).

Thank you for the links. They are super useful from a quick glance and I'll read more carefully and might follow-up with more questions.

Have you been through these threads?

http://forum.singaporeexpats.com/ftopic93619.html

http://forum.singaporeexpats.com/ftopic78558.html

[sdd80]

Strong Eagle - would you be suggest a specialist on the subject? From other posts I understand you recommend the company that you used for your application?

I read the previous links carefully and found them very useful. That said, my understanding is that immigration policies are becoming even stricter and I'd like to speak with a professional on the most up to date view of things.

Thanks in advance

[Strong Eagle]

Strong Eagle - would you be suggest a specialist on the subject? From other posts I understand you recommend the company that you used for your application?

I read the previous links carefully and found them very useful. That said, my understanding is that immigration policies are becoming even stricter and I'd like to speak with a professional on the most up to date view of things.

Thanks in advance

When I set up my company, the Entrepass was much less restrictive and had no requirements for annual spend or number of SG employees. I did it all myself.

You don't really want to go the Entrepass route, in fact, I doubt you could qualify, and you sure as hell would not want to meet the rather onerous requirements in the second and third years. With respect to the LLC versus LLP, I'd do a private limited because the tax consequences are about the same, and it is my intuition that a pte ltd has more "gravitas" in the minds of the authorities.

I can't really recommend anyone on a personal basis. My accountant knows all the rules but isn't much of an advocate in suggesting how to best pursue opening a company and obtaining a work pass. And, she no longer supplies nominee directors.

There are companies out there that allegedly specialize in in handling these matters, for example, http://www.guidemesingapore.com/incorpo ... ackage-fe2. Their fees are outrageous... SGD 1300 to file for an employment pass, for example. And they don't guarantee anything, and they say the same thing I do... your chances of success are really dependent upon your qualifications and past track record.

If I were you, I'd engage someone who can set you up with a nominee director and can form a company for you. That's easy and fast and relatively cheap. Then I would write my own employment pass application and submit manually, along with much of the documentation that is used for the Entrepass.

Your key to success is to convince the authorities that you are a legitimate business, with the potential for income, and the skills to run it. You need a business plan, and no hired professional is going to be able to write one for you. You should also be able demonstrate sufficient funds to support you and the company to break even and profitability. Then I think your chances will be decent.

Remember, there are tons of people trying to get into Singapore via the back door of opening a company then applying for a work pass. Most will be rejected because of skills, no business plan, or no capital. Your job is to differentiate yourself, and I don't see that any professional organization can do any more than parrot what you tell them.

[sdd80]

Thanks for your response. I take on board all your advice, I just want to carefully consider all the options. Agree that Entrepass is not the right route for me.

What are your thoughts on the PEP route? I have a local business partner who is a PR. If he sets up the company and I get a PEP independently then in theory I can be hired by his company. Later on we figure out how to move from PEP to EP or PR at which point I can get equity. I do satisfy the PEP requirements. Can a PEP holder really be employed by any company - even if a newly setup company without trading history?

On the EP route, I feel comfortable with the strength of the offering, doing a solid business plan and can furnish a decent start-up capital. However, I don't think i'll be able to secure contracts in advance - main reason is I don't think any corporate clients would take me seriously before I'm on the ground and authorized to work in SG.

Thanks again.

[Strong Eagle]

Thanks for your response. I take on board all your advice, I just want to carefully consider all the options. Agree that Entrepass is not the right route for me.

What are your thoughts on the PEP route? I have a local business partner who is a PR. If he sets up the company and I get a PEP independently then in theory I can be hired by his company. Later on we figure out how to move from PEP to EP or PR at which point I can get equity. I do satisfy the PEP requirements. Can a PEP holder really be employed by any company - even if a newly setup company without trading history?

On the EP route, I feel comfortable with the strength of the offering, doing a solid business plan and can furnish a decent start-up capital. However, I don't think i'll be able to secure contracts in advance - main reason is I don't think any corporate clients would take me seriously before I'm on the ground and authorized to work in SG.

Thanks again.

You're really moving into uncharted waters here... it's not like MOM publishes guidelines for their decision making process... my opinions and those of others with similar experiences are based upon inputs, outcomes, and intuition/gut feel as to what will work and what won't.

You are obviously aware that PEP's cannot own the company that they work for, and it should be equally obvious that this rule is in effect to tamp down efforts to get in the country by getting a PEP, starting a company and working for it. It's sort of the reverse situation of trying to do an end around the rules by starting a company and applying for an EP.

With this PEP restriction in place against owning your own company, any other company is theoretically able to hire you, including one that was just incorporated yesterday. However in addition to prohibiting you from starting your own company, the MOM website also states, "The PEP holder is not allowed to... ...engage in any entrepreneurial activities."

Given that you must inform MOM of your employer within 7 days of making a change, I would not be surprised to see your employment change reviewed and perhaps denied on the basis of it being an "entrepreneurial activity". But I really don't know. If you are actually making SGD 18,000 per month right now, and you are actually going to be paid SGD 12,000 per month by the new company, then maybe this is an ameliorating element... I suspect most entrepreneurial activities would not pay that much per month.

In any event, I still think you need a solid business plan in place that demonstrates proper skills, a real marketing plan to make the business a reality, and sufficient cash to make it happen, even if you do go the PEP route. In this case, your PR partner could write in several essential skills that the new company will require, skills that you satisfy, so that rather than being an entrepreneur, you are someone with required skill sets.

I'll conclude by saying that I don't _think_ that no contracts in hand is the kiss of death for an EP (but I don't know), so long as all the other elements are satisfied... capital, biz plan, experience, and prior track record elsewhere.

[sdd80]

Appreciate your input. I am quickly coming under the same conclusions. Naturally, I'd like to choose the approach with least resistance and subjectivity from MOM, but it seems like there is no option that's based on a pure objective assessment alone (such as for example point-based systems in some other countries), which is fine.

One question I still have is how paid-up capital can be distributed back to shareholders. Say I ultimately fail to get an EP and need to pull out of this venture, how can I get back the money I invested, and will there be any tax implication? Ideally I don't want to pay it all in salary to myself as that's not tax efficient. Could the company do a share buy-back, or simply liquidating the business would result in returning capital to its shareholders?

[Strong Eagle]

It is quite difficult to return paid up capital in Singapore unless you are closing the company. You don't need to fund your company with share capital, you can do it with loans instead, assuming you're not going with an Entrepass. Start a $2 company, loan it the capital it needs to go.

And again, it is only my sense of things... with a company in place, and a demonstrable cash loaded bank account, I do believe the authorities look more favorably upon an application.