Incorporating a US company from Singapore

Overview

Southeast Asian startups often incorporate companies in both Singapore and the US. Stripe Atlas helps founders incorporate their US company, either as a parent or subsidiary to their Singapore company.

This guide is for founders:

• Living in Southeast Asia
• Considering incorporation in Singapore and the US
• Planning to raise venture capital

Summary

Choose your global company structure

When incorporating a startup in Singapore, founders usually choose a Singapore private limited company (Pte. Ltd.), which is well-suited for raising capital and issuing employee equity.

Founders sometimes add a US Delaware corporation as either a parent or a subsidiary. This decision usually depends on three factors: whether an investor requires a US parent, whether you are or will become a US taxpayer (for example, becoming a citizen, permanent resident, or passing the substantial presence test), and whether you intend to either hire or sell in the US.

Owning a US parent might expose you to US taxes, so take any requirements for a US parent into account when choosing investors. US taxes might include federal and state corporate income taxes, capital gains tax, ordinary personal income tax on future equity grants, and a potential US exit tax, which taxes unrealized equity gains if you later cease to be a US taxpayer.

Importantly, there’s no double tax treaty between the US and Singapore so some of your company’s transactions might be subject to double taxation. Consult with your tax advisor to understand how the tax laws impact your specific situation.

While some VC investors might require a US parent, many will invest in both US and Singapore companies, including Y Combinator (YC).

In summary:

• Choose a US C corp parent if an investor requires one, and either (a) you’re already a US taxpayer or expect to become one, or (b) you can’t find a suitable investor who accepts a Singapore parent.
• Choose a US C corp subsidiary if you intend to operate significantly in the US, either hiring employees or selling to customers there.

While you can reverse your choice of a Singapore parent through a flip, doing so can be complex and costly, involving cross-border lawyers, tax analyses, stamp duty, and thousands of dollars in fees. Conversely, reversing the choice of a US parent can be even more expensive because of US anti-inversion regulations on companies that flip from a US to a foreign parent. Consult with your tax advisor before attempting to restructure your company.

Incorporating a Singapore Pte. Ltd.

Here’s how to incorporate a Singapore Pte. Ltd. as a startup founder. If you’ve already completed these steps, you can skip to the next section:

1. Decide key company roles and details: Before incorporating, you need to agree who will be founders and directors of the company, the proportion of the company’s equity owned by each founder, and the company’s name.
2. Submit company details to ACRA: You can do so yourself through ACRA’s BizFile+ portal (if you’re a local resident or a foreigner with Entrepass) or contract with a corporate service provider such as Osome or Sleek to do so on your behalf.
3. (Optional) Choose a nominee director: Because you need to appoint at least one director who ordinarily resides in Singapore, you might need to contract with a local incorporation service company. You can use a nominee director service such as Osome or Sleek if none of your founding team is based in Singapore.
4. Appoint a company secretary: Within 6 months of incorporating, you need to confirm a company secretary and enter their details in the BizFile+ portal.

If you plan to keep the Singapore Pte. Ltd. as the parent company for the long-term, assign existing and future IP developed by founders for the startup to the company using IP assignment agreements. The same lawyer drafting your founder stock vesting agreement can also help with this.

While there are benefits to initiating an equity vesting schedule for US startups upon incorporation, you don’t need to do so for founders with a Singapore parent. Investors typically negotiate or renegotiate equity vesting schedules before investing.

Incorporating a US company with Atlas

The process of incorporating a US C corp with Atlas varies based on whether you decide it’s the parent or subsidiary of your Singapore Pte. Ltd.

US C corp parent

Follow these steps to create a US C corp parent with Atlas:

1. Incorporate US C corp:

   • Use Atlas to incorporate a C corp. Select C corp on the Structure page.

2. Transfer Singapore Pte. Ltd. shares to the US C corp:

   • Sign a board resolution for the Singapore Pte. Ltd. to approve the transfer of 100% of its existing shares.
   • Update your Singapore Pte. Ltd. cap table so the US C corp is recorded as the sole shareholder of the Singapore Pte. Ltd.

US C corp subsidiary

Most startups outside the US create their US C corp subsidiary before their Series A. Follow these steps to do so with Atlas:

1. Incorporate US C corp:

   • Use Atlas to incorporate a C corp. Select Subsidiary on the Structure page.

2. Arrange for the Singapore Pte. Ltd. to acquire all US C corp shares:

   • Sign a Share Subscription Agreement for the Singapore company to subscribe for 100% of the US company’s shares.
   • Sign the board resolution provided by Atlas after you incorporate your US C corp to issue 100% of its shares to the Singapore Pte. Ltd.
   • Update your US C corp cap table so the Singapore Pte. Ltd. is recorded as the sole US shareholder.

Flip your corporate structure

If you’ve already fundraised with your Singapore Pte. Ltd. as the parent receiving investment and now want a US parent, you need to flip your structure. A flip is the process of replacing your parent company with one of its subsidiaries.

Doing so is worth considering when:

• You’re fundraising from investors who prefer or require a Delaware parent.
• You’ve been accepted into a US accelerator that requires a US parent.
• Your customer base, leadership team, or long-term exit route leans towards the US.

In a typical Singapore-to-Delaware parent flip, shareholders will:

1. Agree on a share swap: All Singapore Pte. Ltd. shareholders agree to exchange their shares for shares in the US C corp parent. Everyone keeps their ownership percentage (for example, a 10% SG shareholder becomes a 10% US shareholder). Each company must sign an agreement and make sure they update any convertibles, ESOP grants, and angel SPVs to reference the new US parent.

2. Pay Singapore stamp duty: Work with a startup lawyer to identify the taxable net asset value of your shares. Shareholders then pay 0.2% of the higher of the price in the stock purchase agreement or the same value in stamp duty. Investors might also have their own tax obligations in connection with the flip, which might make it harder to get their consent. With no double tax treaty between the US and Singapore, a share swap might be treated as a taxable disposal of shares by both jurisdictions.

3. Update ownership information with ACRA: Update ACRA registers and your internal statutory books to reflect the new ownership, through either the BizFile+ portal directly or your company secretarial service.

4. Consider transferring IP to the Delaware C corp: Many startups assign key IP to the Delaware parent or keep IP in Singapore but grant the Delaware parent a long-term license. Your lawyer or tax advisor can help you decide. IP transfers between the two companies must be done at an arm’s length price. With no double tax treaty, check with your tax advisor on potential double taxation of the IP transfer.

Given stamp duty, legal fees, and accountant fees, flips can cost in excess of 20,000 USD for early stage startups. Some startups that know they’ll work with investors who require a US parent incorporate a US C corp parent from the start.

Trusted partners

• Singapore Pte. Ltd. incorporation: Osome and Sleek can register your company with ACRA, and offer nominee director, registered address, and corporate secretary services for additional fees.
• Singapore legal document drafting: Aquinas Law is a Singaporean law firm with extensive experience drafting legal documents for startups, including founder stock and IP assignment agreements.
• US Delaware C corp incorporation: Stripe Atlas handles all of the Delaware steps on your behalf, enabling you to customize equity vesting schedules for each founder, open a bank account, and accept payments before your EIN arrives, 50,000 USD in partner perks, and 2,500 USD in Stripe credits.
• Corporate structure flips: Cooley is a law firm for startups with offices around the world. Its Singapore team has experience in international transactions for startups, including corporate structure flips.

* This guide is for general information only and is not legal, tax, or accounting advice. Consult your own professional advisors about your specific situation.