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Setting up an entity in Japan
You've performed your market research in Singapore and have determined it is wise to set up an entity. We recommend the following steps for business startups:


Business Model Determination

Determine the types of business models the Singapore entity ("SGCO") has available, preferably through the advice of one of the Big Four accounting firms. The engaged firm should provide advice from both Singapore and shareholder perspectives. The model should be established in a way to create global tax savings for the startup. Please refer to Determining your Business Model section for descriptions and general requirements for popular types of business models. Based on the business model, the ideal entity type is determined, such as:
Sole proprietorship
A Sole Proprietorship is a business that is carried on by one individual without using a separate legal entity. The business basically is not regulated by any legislation.
A Partnership is an association where two or more persons carry on a business in common to make a profit. Partnerships are governed by the Partnership Act and the agreement between the partners.
Limited partnership
A Limited Partnership is a partnership with limited partners which is defined in the Limited Partnerships Act.
- Limited liability partnership
A Limited Liability Partnership is a partnership where two or more persons carry on a business as a separate legal entity to make a profit. It is registered under the Limited Liability Partnerships Act.
A Company is a legal entity which is registered under the Companies Act.


Legal Procedures

After the appropriate business model and entity type are determined, the SGCO must be registered with Accounting and Corporate Regulatory Authority ("ACRA"). The SGCO must have at least one director who is ordinarily a resident in Singapore. Every company must appoint a secretary within 6 months of the date of its incorporation. The company secretary must be residing locally in Singapore and must not be the sole director of the company. A company shall appoint an auditor within 3 months from the date of its incorporation unless it is exempted from audit requirements under Section 205B or 205C of the Companies Act. It is recommended that you engage an experienced Singapore law firm to establish the entity. The law firm can also assist in confirming whether your business is subject to any regulatory requirements.

On 15 April 2015, ACRA announced that the legislative changes to the Companies Act would be effected in two phases. The first phase was implemented on 1 July 2015. The second phase will commence in the first quarter of 2016.


Accounting and Payroll Set up

Following the establishment of SGCO, engage a professional accountant or firm to:
(a) Coordinate with your parent's accounting department in setting up an accounting system, which would be compatible with reporting requirement of the parent and also comply (or at least minimize differences) with Singapore accounting standards.
(b) Apply with the Central Provident Fund ("CPF") as soon as you intend to hire your first employee.
(c) Review your employment agreements for compliance with the Singapore Employment Act.
If an employee(s) is to be on an expatriate arrangement, we recommend experienced HR/tax professionals review the relevant employment agreements not only from a Singapore Employment Act compliance perspective, but from the corporate and individual income tax perspective. Although some of the procedures above may seem onerous at the beginning, proper planning will lead to an effective and efficient operating structure. Insufficient planning may result in irreversible implications and/or complications in the future.
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