All you need to know about starting a home-based business
Amid the gloom of the pandemic, Singapore saw a rapid surge in home-based businesses blooming. According to Accounting and Corporate Regulatory Authority (ACRA), there were a total of 63,480 new enterprises registered in 2020, a 3.1 per cent increase compared to 2019. The trend continued in 2021, with 65,438 businesses registered last year.
In the past couple of years, many companies have been hit hard by the pandemic, and their employees have had to suffer through retrenchments, pay-cuts and hiring freezes. For some founders, starting a home business was an opportunity to pursue their passions. For others, it was an alternative way to make ends meet.
Indeed, home-based businesses come with attractive advantages, including flexible working hours and low start-up capital. For budding entrepreneurs that want to be more prudent with their savings, having their home as their base of operations is a cost-efficient way to test-bed their ideas before scaling up.
Launching a home-based business may seem straightforward, but it still requires you to comply with rules and regulations, including applying for licences and permits, as well as filing your taxes. All these processes can be daunting to a first-time business owner.
With GoBusiness’s Home Business Guide, however, the process of starting a home-based business is a lot more streamlined. Whether it’s a freelancing side hustle, or fulfilling your long-awaited dream of being your own boss, the Home Business Guide is a one-stop checklist to walk you through all the rules and regulations on starting a business from your own nest to ensure that you set off on the right foot.
Here’s how you can find everything you need to know about running a business from home in the Guide:
1. Understand your home-business scheme
The first key step before you open for business is to identify your business scheme and understand the provisions and guidelines of the scheme that best suits your business activities.
Depending on the services you offer, you may fall under two different schemes. The Home-Based Business Scheme caters to small-scale businesses like bakeries, freelance artists and hairdressing services. This constitutes most freelancing gigs, including private tuition for not more than three students, and the business can only be operated by owners, registered occupants or tenants of the residential property (with consent from the property owners).
Businesses that fall under the Home Office Scheme constitute small-scale offices running administrative functions, such as consultancy or accountancy services. Home offices are limited to two non-resident employees.
If you are having trouble determining the right scheme for your home business, not to worry - just fill in a 3-minute questionnaire on the e-Adviser for Home-Based Business and you will be redirected to the relevant information tailored to your business’s needs!
2. Comply with provisions and guidelines
Before home business owners embark on their self-employment journeys, it is essential that they are clear on the provisions and guidelines that they need to follow. First of all, new entrepreneurs must register their home businesses with ACRA unless they meet the criteria for exemption.
For instance, you do not need to register your business if you or you and your partner use your full name (s), as per your NRIC, as your business name. Do note that any descriptive words added to the business name will mean that you are required to register your business.
The full list of criteria for exemption can be found in the Business Names Registration Act.
You will be able to register your home-based business as a sole proprietorship or partnership via GoBusiness. Just follow this guide on starting a business in Singapore and you’ll be able to get your business registered in less than 5 minutes.
Apart from registration, certain businesses based at home are also required to obtain licences before they can start selling their products and services. Businesses under the Home-Based Business Scheme do not require a licence for offering their expertise but home office business owners, on the other hand, must obtain relevant licences/approvals before commencing business, including a home office application with the property owner’s consent.
Instant approval will be granted upon the successful submission of your application, as well as a $20 administration fee via Visa or MasterCard. This licence will be valid for the duration of your home office business.
It is also worth noting that the premises must remain as a residential dwelling and the resident taking up the home-based activities should be considerate to their neighbours. Home businesses must abide by the conditions of use for public housing (i.e. HDB flats) and private residential properties respectively.
For further information on the relevant schemes in public housing and private residential properties, you may refer to HDB’s website for more information on public housing; and for private residential properties, please refer to the Urban Redevelopment Authority’s website respectively.
3. Find out industry-specific protocols and requirements
Now that you are registered and licenced, you will need to zoom in on the requirements specific to your field of work. Different industries have various protocols and licences that need to be fulfilled before you can open for business. So business owners should take note to cover all their bases with the necessary paperwork.
For example, business owners running home bakeries are highly encouraged to attend the Basic Food Hygiene Course/WSG Food Safety Course level 1, in order to learn more about food safety. Technology or knowledge-based companies are also recommended to file patent applications for their inventions, to protect their intellectual property.
You may visit the GoBusiness Licensing Portal for an extensive list of the licences and approvals that may be required or recommended for your business.
4. Familiarise yourself with tax regulations
Keeping track of your payments from multiple assignments can be cumbersome. But doing one’s taxes is a necessary part of the compliance process. Now that you have a better understanding of the regulations for your industry, it is time to learn to file your taxes correctly.
For home businesses exempted from registration, and businesses registered as a sole proprietorship, partnership, or limited liability partnership, your income is considered personal tax under “business income”. If your business is registered under the Companies Act or any law in force in Singapore, then its profits will be taxed under “Corporate tax”.
For a breakdown of tax obligations for home business owners, you can refer to the IRAS portal’s basic checklist for self-employed persons.
If you have hired employees under the Home Office Scheme, you are required to pay CPF contributions for employees who are Singapore citizens or permanent residents earning more than $50 per month.
You can use this guide by CPF to calculate the amount of CPF contributions you need to pay.
5. Taking your business to the next level
If your home-based business has achieved significant progress, and you’re ready to expand your operations, congratulations! Here’s what you can do to take your business further:
Your brand may have outgrown your home, and you might need to shift to commercial premises so that you can start hiring employees to upscale your production.
For instance, home-based business owners may need to shift to a retail outlet to continue fulfilling orders on a direct-to-consumer basis. The Home Business guide provides step-by-step instructions on navigating the administrative work involved in opening a physical shop.
Similarly, home offices will also need to shift to an external office in order to hire more than two employees. All you need to do is update your business information on BizFile+ and to HDB via their e-feedback form within 14 days from the effective date of the change.
Home-based business owners often begin as sole proprietors or partners. But as your business expands, you may consider changing business structures, either to a company or a Limited Liability Partnership (LLP).
While the law currently does not allow for the conversion of a sole proprietorship or partnership into a company, you can terminate the business and incorporate a new company. Alternatively, you can choose to convert your existing partnership to an LLP if the existing shareholders will be the partners of the new LLP, and the company has no outstanding debts. This conversion can be easily done via the BizFile+ platform.
Last but not least, you can consider seeking additional support for your expansion. GoBusiness consolidates over 100 government assistance schemes to help local businesses, from financial assistance to training and skills upgrading, as well as support programmes that help businesses adopt IT solutions and equipment.
If you are not sure which schemes to apply for, you can use the e-Adviser for Government Assistance to identify suitable schemes tailored to your business needs. Simply complete a short questionnaire, and the e-Adviser will generate a list of recommended government schemes suitable for you.
A home-based business is only as big as you can dream, so it is crucial to plan ahead for the future. Whether you’re just exploring new ways to earn passive income, or taking baby steps to make your dream job a reality, the GoBusiness Home Business Guide will serve as your playbook, to ensure that you comply with the regulations while running your business from home.
Last but not least, do remember to be considerate to your neighbours when carrying out your business activities at home.
This article is accurate as at 21 Dec 2022