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Doing Business in Singapore VS USA
While the choice of a particular business structure and jurisdiction are important considerations when forming a business, the location is also paramount in achieving success. While traditionally, The United States has been regarded as the most favourable country to set up and operate a business, countries like Singapore, which have devised business friendly policies should not be overlooked. In fact, Singapore currently offers better prospects for entrepreneurs. Undoubtedly, the US offers businesses the largest consumer market with a population of 325 million. Additionally, it also enjoys free trade agreements with several other countries which provides companies enhanced access to hundreds of millions of additional consumers. It also offers investors a business-friendly environment and quality of life. In contrast, Singapore’s natural connectivity to emerging markets in the region, positive labour-employer relations, favourable tax regime, and strong rule of law have all contributed to the country’s competitive advantage. This has enabled the Singaporean economy to grow consistently and rapidly over the past four decades.
Ease of Doing Business
The US has over the years slipped from 4th in the world to 8th in 2017 for the ease of doing business based on a World Bank Doing Business Report. However, as for Singapore, it is a strong number 2. As for the workforce available in both countries, women continue to play a significant part of the labour force at 46.8% in the US and 45.8% in Singapore. The median age of the labour force in the US and Singapore are comparable at 41.9 and 43 respectively. 1 in 3 adults in the US hold a degree or higher, while 43.8% of Singaporeans received tertiary education. In the US, there are two main business entities, mainly the business corporation (company limited by shares) and the limited liability company (LLC). A private limited company is the most flexible and scalable type of business entity in Singapore and also the most preferred form of business entity, as opposed to sole proprietorship or limited liability partnership. A director and a shareholder are required for incorporation. It takes 6 days to incorporate a company in the US, while procedures to form one in Singapore can be completed in a day.
Singapore companies are required to declare their revenue amount and Estimated Chargeable Income (ECI) to the Inland Revenue Authority of Singapore (IRAS) at the end of each Financial Year. Companies must also hold an Annual General Meeting (AGM) once every calendar year. In the US, publicly traded companies must submit a Schedule 10-K, which includes audited financial statements, to the US Securities and Exchange Commission annually. Private companies are not required by law to provide audited financial statements, but best practices and contractual obligations may require that small businesses supply such documents.
As for taxes, in the US, federal corporate tax varies from 15 to 34%, or 35% if taxable income exceeds US$335,000. In contrast, companies in Singapore enjoy a headline corporate tax rate of 17% on their taxable income. Tax exemptions & incentives vary for both countries. One glaring difference, in the U.S., resident corporations are taxed based on worldwide income, whereas for Singapore, profits earned and retained outside the country are not taxable. Albeit operating within a large market, companies in the US face the challenges of a complex taxation system, restrictive labour regulations and bureaucratic inefficiencies. Though Singapore is a much smaller market, it more than makes up for it with its supreme connectivity to key regional economic partners. Better tax laws, more options for incorporating entities and a business-friendly environment remain key draws of Singapore’s successful incorporation climate, as compared to the US.