How To Setup A Sole Proprietorship In Singapore

5 min read|Last Updated: February 6, 2024|

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Once you’ve decided to incorporate a company in Singapore, the next step is understanding the types of business entities, including private limited companies, sole proprietorships, and representative offices.

A sole proprietorship in Singapore is a type of company where you incorporate and run your business independently, with no legal distinction between yourself and your business.

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Before finalising and registering your business as a sole proprietorship, it is always good to understand the pros and cons of such an entity.

What is a Sole Proprietorship?

A sole proprietorship is where you owned 100% of your business and do not have any partners or shareholders. Very small single-owned businesses often find sole proprietorships ideal due to the lack of separation between the individual and the business, though they offer no limited liability protection. Unlike private limited liability companies, sole proprietorships do not safeguard personal assets from business activities.

As a sole proprietor, you will be personally liable for your business’s profits and losses which is not ideal if your business is constantly making a loss and incurring liabilities frequently.

Advantages of Sole Proprietorships in Singapore

There are certain advantages that appeals to business owners who are looking to set up their sole proprietorship in Singapore. These include:

  • Easy incorporation process that requires the least set-up costs among other entities
  • Full control over your own business. E.g., decision making, retaining all profits to yourself etc.
  • Company can be terminated easily as it is less time consuming and less costly as compared to other entities
  • Least compliance requirements as you do not have to file annual returns and only need to renew membership yearly

Disadvantages of Sole Proprietorships in Singapore

Flipping the other side of the coin, here are some disadvantages in incorporating a sole proprietorship that you should consider:

  • You and your business are bound personally – there is no separate legal entity
  • All losses and liabilities are accredited to you
  • No tax reduction, benefits and incentives

  • No perpetual succession
  • Limited by you own capital resulting in difficulty for business expansion

Who is Eligible to Set Up a Sole Proprietorship in Singapore?

To set up a sole proprietorship or partnership, you must be:

  • At least 18 years old
  • A Singapore Citizen, Singapore Permanent Resident, or an eligible FIN holder
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If you are currently self-employed, you must top up your Medisave account with the CPF Board before you register a business, become a new owner of an existing business, or renew your business registration.

Foreigners can register a sole-proprietorships in Singapore, but they must appoint an authorised representative who is a legal resident in Singapore if they reside outside of Singapore. A legal resident includes:

  • Singapore citizens
  • Permanent Residents
  • Employment pass and EntrePass holders

Challenges Foreigners Face When Setting up Sole Proprietorship in Singapore

There are 2 key challenges that foreign entrepreneurs may face after registering a sole proprietorship, which are:

1. Difficulties in obtaining work visas

To start a business in Singapore as a foreigner, you need a valid working visa. Choosing a sole proprietorship may limit expansion plans, affecting future hiring. Consequently, approval for an Employment pass or EntrePass becomes more challenging. Even if approved, obtaining visa approval for future foreign staff can be difficult.

Foreigners without a valid working visa may struggle to open a bank account or obtain a lease in Singapore.

2. Difficulties in expansion and financing

Sole proprietorships face challenges in expansion and hiring staff. This gives the impression of being a small business, making banks and suppliers hesitant to extend credit. Additionally, sole proprietorships cannot offer stock options as hiring incentives. Moreover, raising capital from investors is difficult due to the limitation of one owner controlling the business.

Documents Required to Incorporate a Sole Proprietorship

In order to register a sole proprietorship business in Singapore, the following documents and information are required:

  • Proposed company name
  • Description of principal activities
  • Local business address for the proposed business
  • Copy of owner’s Singapore ID
  • Local residential address of sole proprietor
  • Declaration of compliance and Statement of Non-Disqualification

How to Incorporate a Sole Proprietorship in Singapore?

Before you incorporate, you will need to register and reserve your ideal company name.

Typically, completing all documents properly makes the registration of a sole proprietorship automated and efficient, usually completing within 1 day.

If the company name or business nature requires referral to another authority, the process may take a few weeks longer.

Businesses like financial, media, educational services, etc., may require referral to relevant authorities.

To maximise chances of name approval, do make sure that it:

  • is not identical or too similar to any existing local company or business names
  • does not infringe any trademarks or copyright
  • is not obscene or vulgar
  • is not already reserved

Post-Incorporation Activities for Sole Proprietorships

Sole proprietors don’t need to undergo annual audits or submit financial statements to ACRA. As the business owner, you must file an annual income return with IRAS, covering the revenue and profits of the sole proprietorship.

Tax for sole proprietorships is filed at a personal rate of 0% to 22%, as they’re not considered legal entities for tax purposes.

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FAQs

Is sole proprietorship an entity?2021-11-12T10:05:20+08:00

Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business.

How much does it cost to set up a sole proprietorship in Singapore?2021-11-12T10:04:19+08:00

The last step of the registration process is registering online through the BizFile+ website, with a registration fee of $115 (1-year) or $175 (3-year). Once the fee has been paid, the sole proprietorship is set up within 15 minutes.

Is sole proprietor considered self-employed?2021-11-12T10:03:55+08:00

Self-employment means that you are the sole proprietor of the business, a member of a business partnership or an independent contractor.

What is a sole proprietorship Singapore?2021-11-12T10:03:12+08:00

A Singapore Sole-Proprietorship is a business owned by one person or one Singapore-registered company. It is the simplest form of business structure in Singapore that meets the statutory requirement to register all profiteering activities carried out on a continuous basis.

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