Navigating the Singapore Business Landscape: EP, LOC, and EntrePass for Foreign Entrepreneurs

For most prospective business owners, the options for a foreigner to be allowed to incorporate and own shares in a local Singapore company will be between Employment Pass (EP) and Letter of Consent (LOC).

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Employment Pass (EP) vs. Letter of Consent (LOC):

The EP offers greater autonomy. EP holders can serve as local directors, eliminating the need for nominee directorships – a common practice where a local citizen holds the director position on behalf of the foreign owner, incurring additional fees. Additionally, EP holders can independently open corporate bank accounts, streamlining financial operations.

However, the EP comes with hurdles. Applications involve a higher service fee and can take longer to process. Furthermore, the minimum salary requirement of SGD5,000 per month and qualification criteria can pose a challenge for some entrepreneurs.

For foreigners that have moved with a spouse or other family members, and currently hold a Dependent Pass (DP), the LOC boasts a simpler and faster application process with no associated fee from the Ministry of Manpower (MOM). This makes it an attractive option for those seeking a quicker entry into the business scene.

Yet, the LOC comes with its own set of limitations. Entrepreneurs relying on the LOC must utilise nominee directors, adding an extra layer of cost. Moreover, the LOC's validity is tied to the holder's Dependent Pass (DP), meaning any cancellation or expiration of the DP renders the LOC invalid. Renewing an LOC also comes with a new hurdle: the requirement to hire a local employee at a qualifying salary, potentially adding unforeseen HR considerations for nascent businesses.

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Employment Pass (EP)
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Pros

• Ability to serve as a local director, thus eliminating the need for nominee directorship services and associated costs.
• Option to open a corporate bank account in Singapore without incurring additional fees for the nominee director's presence at the bank.
  

Cons

• Costs associated with EP application.
• Long processing time for application and subjected to minimum salary requirements and qualification.

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Letter of Consent (LOC)
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Pros

• Application is free and can be done on your own.
• Easier and faster process for application.

Cons

• Cost of Nominee Directorship.
• Ceases validity upon cancellation or expiration of Dependent Pass (DP).
• To be eligible for a renewal of the Letter of Consent in Singapore, a DP holder who is also the business owner must hire at least one Singaporean or Permanent Resident who earns at least the prevailing local qualifying salary and receives CPF contributions for at least three months.
• Unable to independently open a bank account, thus you'll require the assistance of a Nominee Director at an additional fee.

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EntrePass: A Viable Option for Innovative Minds

This work pass is not intended for the vast majority of businesses, so generally EP or LOC would be a more suitable option for most.

The EntrePass emerges as a compelling choice for foreign entrepreneurs with a focus on innovation.  This pass caters to serial entrepreneurs, high-caliber innovators, and experienced investors seeking to establish venture-backed or technologically advanced businesses in Singapore.

EntrePass holders enjoy similar benefits to EP holders, including the ability to act as local directors and open corporate bank accounts independently.  However, the application process for the EntrePass is likely to be more rigorous, with a focus on the business concept's potential to contribute to Singapore's innovation ecosystem.

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Choosing the Right Path

The choice between EP, LOC, and EntrePass depends on individual circumstances and business goals.  Here's a quick breakdown:

• For established entrepreneurs with strong qualifications and a long-term vision, the EP offers the most control and independence.
• For those prioritizing speed and lower initial costs, the LOC may be a suitable starting point, but comes with limitations.
• The EntrePass is ideal for innovative entrepreneurs with a focus on building a high-growth, technologically advanced business in Singapore.

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Ultimately, a well-informed decision, considering both short-term and long-term objectives, is crucial for foreign entrepreneurs seeking to navigate the exciting yet nuanced business landscape of Singapore.