How To Setup A Sole Proprietorship In Singapore

When you’ve decided to incorporate a company in Singapore, the next step is to understand the types of business entities, from private limited companies, sole proprietorship to representative offices.

A sole proprietorship in Singapore is a type of company where you incorporate and run your business on your own 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.

A sole proprietorship is where you owned 100% of your business and do not have any partners or shareholders. It is very suitable for very small single-owned businesses that do not pose any dangers to the owner as there is no separation between person and entity for sole proprietorships.

This means, unlike a private limited liability company, sole proprietorships do not provide limited liability protection and does not safeguard your personal assets from your 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.

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

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

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:

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

1. Difficulties in obtaining work visas

To kick start your business as a foreigner in Singapore, you need to hold a proper working visa to legally work here and also relocate your family to Singapore. Having a sole Proprietorship as a business structure would give the Ministry of Manpower an impression that the business is not going to expand and therefore will not hire many local staffs in future. As a result, when you, as a foreign entrepreneur, apply for an Employment pass or EntrePass, it is less likely to be approved.

Even if it is approved, the business will face difficulties in getting visa approval for their future foreign staffs. If the foreigner does not have an approved working visa, it will also mean that he will have difficulties in opening a personal bank account and obtain a lease as he does not have the visa to stay in Singapore after his travel or business visa expires.

2. Difficulties in expansion and financing

Sole Proprietorships have trouble in expansion and hiring staffs. It gives people the impression that it is small business and therefore banks and suppliers are less willing to extend credit. Furthermore, when it comes to hiring, sole proprietorship business cannot give stock option as a hiring or rewarding incentive. It is also difficult to raise capital from investors as sole Proprietorship only allows one owner and all control of the business lay in one person.

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

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

The registration procedure for sole proprietorships is automated and efficient and can usually be completed within 1 day, provided all the documents are completed properly with due endorsements. However, if the company name or the nature of business requires referral to another authority, it may take up to a few weeks.

Examples of businesses that may be referred to relevant authorities include financial, media, educational services, etc.

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

Because sole proprietorships do not qualify as a legal entity for tax reasons, they are not eligible for Singapore’s low tax rates or tax benefits. It is worth noting that the chargeable income of sole proprietorships is taxed at a personal rate of 0% to 22% for the owners.

Meanwhile, the effective tax rate for new businesses and businesses with chargeable incomes of less than S$100,000 and less than S$10,000 is only 4.25%. The maximum rate of corporation taxation in Singapore is 17%.

For sole proprietorships, they are exempted from annual audits and are not required to file annual financial statements with ACRA. However, you as the owner of the business, must file annual income return that includes the revenue and profits of the sole proprietorship with IRAS.