permalink setup for site with add-on domain

I’m currently working on a wordpress site for a client. The domain for the site is actually an add-on domain pointing to a subdirectory under a parent hosting account.

Domain wordpress is hosted on: mydomain.sg (listed as an add-on domain in cpanel)
When I access it via FTP: /home/mainaccount/public_html/mydomain/

How do I setup permalinks? When I copy the .htaccess info from wordpress and drop it into the wordpress directory, I get 500 server errors.