What’s in this article
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.
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:
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:
Who is Eligible to Set Up a Sole Proprietorship in Singapore?
To set up a sole proprietorship or partnership, you must be:
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:
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:
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:
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.
FAQs
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.
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.
Self-employment means that you are the sole proprietor of the business, a member of a business partnership or an independent contractor.
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.