Starting an SME in Singapore: Legal, Financial & Operational Checklist

Singapore is a global business hub known for its pro-enterprise policies, robust legal framework, and extensive support for small businesses. Setting up a small and medium-sized enterprise (SME) in Singapore is a promising opportunity for aspiring entrepreneurs, but it comes with specific legal, financial, and operational responsibilities. This guide offers a comprehensive checklist for those looking to start an SME venture in Singapore.

What is an SME in Singapore?

Definition of SME by ACRA and Enterprise Singapore

Examining the relevant authorities’ definitions is essential to understanding what is a small and medium-scale enterprise, or SME in Singapore. According to Enterprise Singapore, an SME is defined as a business with:

• An annual sales turnover of not more than S$100 million, or
• The employment size should not exceed 200 employees.

Meanwhile, the Accounting and Corporate Regulatory Authority (ACRA), which governs Company Registration in Singapore, doesn’t provide a separate definition for SMEs but requires all businesses to register under a legal entity before operating. So, when asked what an SME is in Singapore, it typically refers to businesses that fall under these thresholds while being registered entities with ACRA.

Importance of SMEs in Singapore’s Economy

Role in GDP and Employment Generation

The importance of SME in Singapore cannot be overstated. SMEs account for 99% of all enterprises in the country, contribute to 45% of the GDP, and employ over 70% of the workforce. They are the backbone of Singapore’s diversified and resilient economy.

Government Support for SMEs

Recognizing their critical role, the government offers a range of support mechanisms – from tax incentives and grants to digital transformation schemes – specifically targeted at small and medium enterprises in Singapore.

How to Qualify as an SME in Singapore

Financial and Operational Criteria for SME Status

So, how do I qualify as a SME in Singapore? The criteria include:

• A locally incorporated company.
• At least 30% local shareholding by Singapore citizens or Permanent Residents.
• Annual sales turnover ≤ S$100 million or ≤ 200 employees.

These qualifications are especially relevant when applying for government schemes, such as the Enterprise Development Grant (EDG) or Startup SG programmes in Singapore. EDG is for established local SMEs looking to upgrade, innovate, or expand their operations. Startup SG, on the other hand, provides a range of resources and support, including funding and mentorship, to early-stage startups. These are the standard criteria used by ESG, but they might change from time to time for the purpose of grants applicable to SMEs.

Types of Small and Medium Enterprises

Micro vs Small vs Medium Businesses

Under the broader SME category, Singapore further distinguishes between:

• Micro enterprises: Typically fewer than 10 employees and low annual revenue (usually not more than S$1 million.)
• Small enterprises: Employ between 10 and 50 people, with moderate revenue.
• Medium enterprises: Up to 200 employees and revenue nearing the S$100 million mark.

Understanding these types of small and medium enterprises can help them access the right government support and comply with specific regulations.

Legal Checklist for Starting an SME in Singapore

Business Registration with ACRA

The first step in launching any SME is completing your ACRA Company Registration. This is done through BizFile+, ACRA’s online filing system. You’ll need:

• Company name approval.
• A registered business address.
• Appointment of directors, shareholders, and a company secretary.

Choosing the Right Business Structure

Before company incorporation in Singapore, choose the appropriate legal structure:

• Sole Proprietorship: Simple and low-cost, but no liability protection.
• Partnership: Shared responsibilities and risks.
• Private Limited Company (Pte Ltd): Most popular for SMEs due to limited liability and better access to funding.

Licenses & Permits Required by Industry

Depending on your business sector – F&B, retail, education, fund services, etc., you’ll need specific licenses from authorities like NEA, URA, or MAS. Always verify industry-specific requirements after company registration.

Financial Checklist for Singapore SMEs

Setting up the financial foundation for your SME is critical:

• Corporate Bank Account: Opened after incorporation.
• Accounting System: Use digital tools to manage finances and comply with IRAS requirements.
• GST Registration: Mandatory if your turnover exceeds S$1 million.
• CPF Contributions: Central Provident Fund contributions. Required for all Singaporean and PR employees.

You’ll also need to prepare a business plan and financial projections to access funding or qualify for grants.

Operational Checklist to Launch & Sustain Your SME

Here’s what you’ll need on the operational side:

• Office Space or Virtual Office: Must match the ACRA-registered business address.
• Hiring Staff: Ensure compliance with MOM rules and EP/DP applications if hiring foreigners.
• Marketing and Sales Strategy: Establish a digital presence early – website, SEO, and social media.
• Technology Tools: Use business management platforms like Xero, QuickBooks, or CRM tools.

These steps ensure your SME is launched legally and equipped to grow sustainably.

Government Grants and Support Schemes for SMEs

Singapore offers generous financial assistance and capability development programmes for SMEs:

• Enterprise Development Grant (EDG): Supports innovation and growth projects.
• Productivity Solutions Grant (PSG): This grant funds tech solutions to streamline operations, improve productivity, and automate existing processes through IT.
• Startup SG: Funding and mentorship for eligible early-stage businesses.
• Market Readiness Assistance (MRA): For SMEs looking to expand overseas.

Most of these schemes require applicants to meet the SME Singapore criteria mentioned earlier.

Common Challenges Faced by SMEs in Singapore

Even with abundant support, SMEs in Singapore face several challenges:

• High Operational Costs: Rent, wages, and compliance can be expensive.
• Talent Acquisition: Stiff competition from MNCs for skilled labour.
• Digital Transformation: Many SMEs lag behind in adopting digital tools.
• Cash Flow Management: Especially critical for micro and small enterprises.

Government initiatives aim to alleviate some of these issues, but proper planning and execution remain key.

Experience Lanturn’s Guidance for Your Business

Starting an SME Singapore business is exciting and rewarding, especially in a country offering extensive support to help small businesses thrive. Whether you’re still researching what small and medium-scale enterprises are, or are preparing for Company Incorporation in Singapore, this checklist gives you a clear roadmap. From ACRA Company Registration to understanding the types of small and medium enterprises in Singapore, ensuring compliance and financial readiness can set your SME up for long-term success. Remember to tap into government grants, address operational needs, and prepare for the common hurdles many small and medium enterprises in Singapore face. Ready to start your business journey? Your SME can become a key player in Singapore’s vibrant economy with the proper foundation. Choose Lanturn to make ACRA company registration easy, ensuring a smooth start to your business journey. Experience expert guidance every step of the way. Book a call with us today, and learn more about our incorporation services.