Starting A Business In Brunei: A Beginner's Guide

Starting a small business in Brunei is an attractive prospect for many entrepreneurs. Brunei's favourable economic climate, low cost of living, and supportive government make it an ideal location for businesses. The country's well-educated, English-speaking population, excellent infrastructure, and stable political environment further add to its appeal for potential investors.

The process of starting a business in Brunei involves several steps, including choosing a business structure, registering the business, opening a corporate bank account, and obtaining the necessary licenses and permits. It is also important to consider the unique business and cultural considerations that shape the country's business landscape.

This guide will provide an overview of the key aspects of starting a small business in Brunei, including the benefits and challenges of doing so.

Choosing a business structure

When starting a small business in Brunei, it is important to consider the different business structures available and choose the one that best suits your needs and goals. Here is an overview of some common business structures in Brunei:

• Sole Proprietorship: This is the most common form of business structure in Brunei. In a sole proprietorship, the owner and the business are considered the same entity. This means that the owner has unlimited liability and is personally and financially responsible for all business debts and legal actions. Sole proprietorships are easy to form and do not require additional paperwork. However, it can be difficult to raise funds for this type of business, and it may have a limited lifespan. A registration fee of $30 is charged for sole proprietorship registration in Brunei, and it is only open to Brunei citizens or permanent residents.
• Partnership: A partnership is similar to a sole proprietorship, where two or more partners share unlimited liability. Partnerships are also subject to the same registration fee of $30 and are limited to a maximum of 20 partners. Like sole proprietorships, partnerships are not open to foreigners unless they are Brunei citizens or permanent residents.
• Company: A company is a separate legal entity from its directors and shareholders. It can be privately or publicly held and requires a minimum of two shareholders and two directors, one of whom must be an ordinary resident of Brunei Darussalam. The registration fee for a company is $300, and you will also need to create an account with the Ministry of Finance and Economy for your ROC account registration through their One Common Portal (OCP).
• Limited Liability Company (LLC): An LLC limits the personal liability of its owners for business debts. It can be owned by one or more people or companies and must have a registered agent. LLCs offer liability protection for owners and are relatively easy to set up. However, additional paperwork may be required, and LLCs cannot issue stock. Annual filing fees must be paid to the state.
• Limited Liability Partnership (LLP): An LLP is similar to an LLC but is typically used for licensed business professionals such as attorneys or accountants. Partners in an LLP have limited liability for the debts and actions of the partnership. LLPs are easy to form and do not require much paperwork. There is no limit to the number of partners, but all partners must actively participate in the business. However, LLPs cannot issue stock, and all partners are personally liable for any malpractice claims.

Before choosing a business structure, it is advisable to discuss your specific situation with a small business accountant or attorney, as each business type has different tax treatments and implications for your business operations.

Registering your business name

• Under Brunei's business name act, you are not allowed to use exact or resembling business names of existing firms. Additionally, the following words will not be permitted: "Royal", "Diraja", "Brunei", "Co-operative", "Savings", or "Trust/Trustee". This is done to prevent any untrue relations or patronage with the Sultan or the government of Brunei.
• If your business name is approved, you will be prompted to pay a registration fee of $300 for foreigners. Once you have made the payment, an official business/company registration certificate will be sent to your email.
• Your business will be automatically registered with Tabung Amanah Perkejah (TAP), which is a compulsory employee trust fund that the government of Brunei will use to invest and make returns.
• The registration process can take up to twelve weeks to complete.

Setting up a corporate bank account

Choosing a bank

There are seven banks licensed to operate in Brunei, three of which are major banks: Perbadanan Tabung Amanah Islam Brunei (TAIB), Baiduri Bank, and Bank Islam Brunei Darussalam. Four banks have international ownership: RHB Bank, Maybank, Standard Chartered Bank Brunei, and CIMB Brunei.

Account type

The most popular types of accounts are personal current accounts and savings accounts. Each bank will offer a few options of each, with varying degrees of charges applicable. For example, accounts tend to have a monthly fee, but this often comes with perks such as free withdrawals, transfers, or transactions up to a certain number of uses.

Paperwork

To open a corporate bank account, you will need to visit a local branch. You can start the application process online, but supporting documents must be presented in person. Most bank branches have English-speaking staff. Opening a bank account can take some time, so it is recommended to book an appointment.

The following documents are required to open an account:

• Passport
• Visa
• Rental agreement
• Financial history
• Three months of bank statements
• Employment contract

Additional considerations

The official currency in Brunei is the Brunei dollar, which is pegged against the Singaporean dollar. Most people tend to bank and spend in Brunei dollars, which can be accessed from the many ATMs in the country.

It is also important to note that banks in Brunei are under a legal obligation to check the identity of those who request to open an account with them. They can be prosecuted if any of their accounts are used for money laundering.

Understanding the tax implications

Brunei has a low corporate income tax rate of 18.5%, and no personal income tax, value-added tax, or withholding tax on dividends, interest, royalties, and fees for technical services for resident companies. This means that businesses keep more of their profits, and individuals have higher disposable incomes. However, employers are required to contribute 5% of local employees' wages to the Employees Trust Fund.

If you are a non-resident company, withholding tax rates range from 2.5% to 10%. A company is considered a resident if it is managed and controlled in Brunei, and a non-resident otherwise. Additionally, if your business is in the oil and gas industry, it will be subject to a special income tax rate of 55% under the Income Tax (Petroleum) Act of 1963.

The type of business structure you choose will also impact your tax obligations. If you are a sole proprietorship or limited liability company, your business will likely be taxed at the corporate level. If you are an 'S' Corporation, your business will likely be taxed at the individual level.

It is important to note that any profits generated by your business must be paid out in full over a period of 10 years and reinvested in the company or used to support other businesses within Brunei. This promotes the circulation of capital within the country and encourages economic growth.

Creating a business plan

Executive Summary

Begin your business plan with an executive summary, which provides an overview of your proposed business. Describe the nature of your business, highlighting its goals and the methods you plan to achieve them. This section should be written last, after finalising the other components of your business plan.

Company Description

Explain what problem your product or service solves and why your business is the best solution. For example, if you have a background in molecular engineering and are starting an athletic wear company, explain how your expertise will help create the best material for consumers.

Market Analysis

Analyse how well your company is positioned against its competitors. Include a target market, segmentation analysis, market size, growth rate, trends, and a competitive environment assessment. Understanding your competition will help you identify what sets your business apart.

Organisation and Structure

Describe the type of business organisation you plan to establish, the risk management strategies you will implement, and the management team's qualifications. Also, specify whether your business will be a single-member limited liability company (LLC) or a corporation.

Mission and Goals

Include a brief mission statement and detail the specific, measurable, action-oriented, realistic, and time-bound goals you wish to accomplish, along with the steps to achieve them.

Products or Services

Explain how your business will operate, including the products or services you will offer, how they compare to competitors, pricing, production or sourcing processes, and responsible personnel.

Background Summary

Compile and summarise data, articles, and research studies on trends that could positively or negatively impact your business or industry. This section is time-consuming but provides valuable context for your business plan.

Marketing Plan

Identify the characteristics of your product or service, summarise the SWOT analysis, and analyse your competitors. Detail your marketing strategies, budget, and expected campaign duration.

Financial Plan

The financial plan is critical to your business plan, outlining the proposed budget, income statement, balance sheet, and statement of cash flows. Include projected financial statements for five years, and if seeking external funding, include your funding request in this section.

Remember, your business plan should be dynamic and adaptable as you receive feedback and refine your business concept.

Frequently asked questions