How To Setup A Sole Proprietorship In Singapore

Once you decide to incorporate a new business in Singapore, the next step involves understanding various types of business structures, including sole proprietorships, private limited liability partnerships, and corporations.

A sole proprietorship is a business type wherein the business owner incorporates and operates their businesses independently with no separate legal entity, making the sole proprietorship the simplest and easiest form of business to set up and operate. Sole proprietors also personally file taxes and own 100% of business income and assets, highlighting that sole proprietorship is a business owned entirely by one individual.

Prior to registering for a sole proprietorship in Singapore, it is imperative to thoroughly assess the pros and cons associated with such business entities.

What is a Sole Proprietorship?

A sole proprietorship is the most basic form of business in Singapore. It is essentially a business that is owned and controlled by one individual, without a separate legal identity. In other words, the owner and the business are one and the same.
When you register a sole proprietorship with the Accounting and Corporate Regulatory Authority (ACRA), you are essentially declaring that you are carrying out business activities under a registered name. However, unlike a Private Limited Company (Pte Ltd), the sole proprietorship does not become a separate legal entity.

Key Features of a Sole Proprietorship in Singapore:

• Single Ownership: Owned by one individual or a single corporate entity.
• No Separate Legal Entity: The business is not distinct from the owner.
• Full Control: The owner makes all decisions and keeps all profits.
• Unlimited Liability: The owner is personally liable for all debts and obligations.
• Taxation: Business income is reported as part of the owner’s personal income and taxed at personal income tax rates (0%–22%), rather than the corporate tax rate.
• Simplicity: Minimal compliance requirements, no annual audits, no corporate secretarial duties.

In practice, a sole proprietorship in Singapore is ideal for:

• Freelancers and consultants
• Home-based entrepreneurs
• E-commerce sellers
• Small retail or service shops
• First-time entrepreneurs testing a business idea before incorporating a Pte Ltd

How Does It Work in Singapore?

Registering a sole proprietorship in Singapore is straightforward and often completed within a single day. Here’s how it functions in practice:

1. Registration with ACRA: The business name and details are lodged online through ACRA’s BizFile+ portal using a SingPass login. If there are no complications (e.g., name conflicts or regulatory approvals needed), a Unique Entity Number (UEN) is issued the same day.
2. Tax Filing: Unlike companies, sole proprietorships don’t file separate corporate tax returns. The profits (or losses) of the business are declared under the owner’s personal income tax return with the Inland Revenue Authority of Singapore (IRAS).
3. Business Operations: With a UEN in hand, the owner can open a business bank account, sign contracts, lease office space, or invoice clients under the sole proprietorship’s name.
4. Compliance: Annual compliance is minimal. Owners only need to renew the business registration each year (or every three years if opted), file personal income tax, and top up CPF Medisave contributions if self-employed.

This lean process makes sole proprietorships attractive to entrepreneurs who want to get started quickly with minimal overhead.

Sole Proprietorship vs. LLC vs. Partnership

Choosing between a sole proprietorship, a Private Limited Company (Pte Ltd/LLC), and a Partnership is one of the most important early decisions when starting a business in Singapore.

Advantages of a Sole Proprietorship in Singapore

Despite its limitations, a sole proprietorship offers several key benefits, particularly for small ventures.

1. Low Cost of Setup

• Name reservation fee: S$15
• Registration fee: S$115 (1 year) or S$175 (3 years)
• Renewal fee: S$30

This makes it one of the cheapest ways to formalise a business in Singapore.

2. Fast and Simple Registration

Most applications through BizFile+ are approved within the same day, giving entrepreneurs the ability to start operating almost immediately.

3. Total Control and Flexibility

The owner makes all business decisions and keeps 100% of profits. There’s no board of directors or shareholders to consult.

4. Minimal Compliance

No audited accounts, no corporate filings, no company secretary. Annual obligations are limited to renewing the business registration and filing personal income tax.

5. Easy Termination

Closing a sole proprietorship is simpler and cheaper compared to winding up a Pte Ltd.

6. Great for Small-Scale or Low-Risk Ventures

If you’re starting a small e-commerce store, offering freelance services, or testing a new product idea, the sole proprietorship offers a low-risk entry point.

Disadvantages of a Sole Proprietorship in Singapore

While the simplicity of sole proprietorships is appealing, entrepreneurs must carefully weigh the disadvantages.

1. Unlimited Personal Liability

The biggest drawback is that there is no separation between personal and business assets. If the business incurs debts, legal claims, or liabilities, creditors can pursue the owner’s personal assets such as property, savings, or vehicles.

2. Limited Access to Funding

• Banks and financial institutions often prefer incorporated companies for loans.
• Investors and venture capitalists rarely fund sole proprietorships since they cannot issue shares.
• Employee stock options cannot be offered, making it harder to attract talent.

3. No Corporate Tax Incentives

Unlike Pte Ltd companies, sole proprietorships do not enjoy corporate tax exemptions such as the Start-Up Tax Exemption Scheme (SUTE) or partial tax exemptions. As profits grow, the personal tax rate (up to 22%) can actually be higher than the corporate tax rate.

4. Lack of Perpetual Succession

The business ceases to exist when the owner retires, passes away, or decides to stop operating. This makes long-term continuity and succession planning difficult.

5. Limited Credibility

Clients, suppliers, and potential partners may perceive sole proprietorships as less stable compared to incorporated companies.

Challenges Foreigners Face When Forming a Sole Proprietorship in Singapore

While Singapore welcomes foreign entrepreneurs, setting up a sole proprietorship as a non-resident comes with additional hurdles.

1. Requirement for Local Authorised Representative

Foreigners who wish to register a sole proprietorship must appoint a local authorised representative who is a Singapore Citizen, Permanent Resident, or holder of an Employment Pass/EntrePass. This person must be legally responsible for compliance matters.

2. Difficulty Obtaining Work Visas

The Ministry of Manpower (MOM) is stricter in granting Employment Passes or EntrePasses for sole proprietorships compared to Pte Ltd companies. This is because sole proprietorships lack the governance structures and financial reporting that MOM typically looks for when assessing business viability.

3. Banking and Financing Limitations

Foreign owners often face challenges when opening a business bank account or obtaining credit facilities under a sole proprietorship, as banks view them as higher risk.

4. Growth and Expansion Hurdles

Without the ability to raise equity or easily scale operations, foreigners may find it difficult to expand a sole proprietorship beyond a small venture.

Documents Required to Incorporate a Sole Proprietorship in Singapore

To register a sole proprietorship with ACRA, the following are needed:

• Proposed business name
• Description of principal business activities (aligned with SSIC codes)
• Local business address (must be a physical address, not a P.O. Box)
• Copy of owner’s Singapore NRIC or FIN
• Local residential address of the proprietor
• For foreigners: details of local authorised representative

Additionally, self-employed individuals must ensure their CPF Medisave contributions are topped up before registering.

Step-by-Step: How to Register a Sole Proprietorship in Singapore

Choose a Business Name

Reserve through BizFile+ (valid for 120 days). Ensure it is unique, not offensive, and doesn’t infringe trademarks.

Provide a Local Business Address

Can be a commercial office or home address (with approval under the Home Office Scheme from URA/HDB).

Appoint an Authorised Representative (for foreigners)

Must be a Singapore resident with legal responsibility.

Submit Application via BizFile+

Log in using SingPass, complete the form, and pay fees (S$115 for 1 year or S$175 for 3 years).

Receive UEN and Start Operating

Once approved, the UEN allows you to open bank accounts, sign contracts, and conduct business officially.

Post-Incorporation Activities

After registration, a sole proprietor should:

• Open a business bank account under the sole proprietorship’s name.
• Apply for relevant business licences/permits depending on industry.
• Keep proper records of income and expenses for tax filing.
• File personal income tax with IRAS annually.

Costs of Registering a Sole Proprietorship in Singapore

• Business Name Reservation: S$15
• Business Registration: S$115 (1 year) or S$175 (3 years)
• Renewal: S$30
• Local Authorised Representative (for foreigners): Varies depending on service provider
• Other costs: Office rental, licences, insurance, etc., depending on business nature

Overall, this is the cheapest business entity to start in Singapore.

How to Close a Sole Proprietorship in Singapore

1. If you wish to cease operations, the closure process is straightforward:
2. Notify ACRA via BizFile+ of cessation.
3. Settle all outstanding debts and obligations.
4. Cancel business licences and permits.
5. Close the business bank account.
6. Dispose of or transfer assets.
7. File final income tax return with IRAS.
8. Officially deregister the sole proprietorship.

Conclusion

A sole proprietorship in Singapore is the simplest and most cost-effective way to start a small business. With quick registration, minimal compliance, and full control, it is well-suited for freelancers, consultants, and entrepreneurs who want to test business ideas before scaling up.
However, the trade-off is significant: unlimited personal liability, limited funding options, lack of tax incentives, and no perpetual succession. For anyone planning to grow their business substantially, transitioning to a Private Limited Company (Pte Ltd) is usually recommended.
If your venture is small, low-risk, and you want to get started quickly with minimal cost, then a sole proprietorship may be the ideal structure in Singapore. But if you aim to raise funding, attract investors, or protect personal assets, consider starting (or later converting to) a Pte Ltd.