Can a Foreigner Set up Sole Proprietorship in Singapore?

Registering a sole proprietorship in Singapore for foreigners is pretty common. However, there are certain aspects that may not be as favourable, which will be discussed later in the article.

For starters, a sole proprietorship is a business owned by only one individual. In this form of business, the have the absolute say in its operations, management and the day-to-day running of the company.

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

Starting a Singapore business as a foreigner is already a difficult task by itself and choosing the right legal structure is utmost crucial. The reason is that the success of your business relates to the choice of business structure you selected. Below are some of it:

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 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 pass, 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.

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Sole Proprietorships have trouble in expansion and hiring staffs. It gives people an 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 a sole proprietorship, the business and its owner are considered a single legal entity. Therefore, the business owner is personally liable for the debts of the business and any other legal action taken against it. You as a foreign entrepreneur can also be sued in a personal capacity and the worst of it all, it will deem you to have an unlimited liability. Therefore, if anything of such happens, it will put your personal assets at risk.

Taxation of a sole proprietorship business can also attract higher tax rate compares to a private limited company. The reason being that tax is calculated for sole proprietorship profit from $20,000 at 2% to a maximum of 22%. Whereas the maximum company tax rate is 17% and tax exemption for new start-up company is $75,001, it means that profit from $0 to $75,000 is NIL tax.

Many chose to incorporate a sole proprietorship because it is the easiest and least costly of all business structures to set up, unlike the setup of other forms of business where there will be so many formalities and compliance requirements.

One major advantage of a sole proprietorship is that all profits generated will go directly to the sole proprietor. Unlike a company, there is no other shareholder where the dividend needs to be declared to.

It is also easier to shut down the business. Under sole proprietorship business, the process striking off is easy. Pay off all your business debts and report a yearly tax then declare in annual

So getting back to the questions, here is the answer. To own a sole proprietorship, you must be either a Singaporean citizen, Permanent Resident (PR), Employment Pass or EntrePass holder who is 18 years old and above.

Sole proprietorship in Singapore for foreigners is not highly advised, but you can still apply based on the requirements above.

The Business Names Registration Act 2014 states that where an individual proprietor, all the partners of a firm or all the officers of a foreign company does not or do not reside in Singapore, the individual proprietor, firm or foreign company must appoint at least one authorised representative.

Hence, if you are an individual proprietor who does not reside in Singapore, you are required to appoint a local authorised representative, who must be ordinarily residing in Singapore, be at least 21 years of age and have full legal capacity.

Foreigners who opt to reside in Singapore to run their business will however go through a very stringent process for their work visa. Therefore, it’s recommended that all owners who want to manage their company’s operations and be present in Singapore seek approval from the MOM forehand, and perhaps obtain an Employment Pass or an EntrePass.

As a foreigner you don’t have a valid working visa, and if any of the proposed partners do not have a SingPass, it is highly disadvantages for your business. The reason is that only an individual with a SingPass or CorpPass can proceed to submit any online business transactions, this means only legal residents in Singapore are able to do those. They must log in to BizFile+ using their identification number (NRIC or FIN) and SingPass/CorpPass.

Basically, what we are concluding is, a sole proprietorship is not a good option for foreigners setting up a Singapore business. Foreign business professionals should incorporate a private limited company instead, and it will be much helpful for the credibility and image of your business.

For further details about Singapore company incorporation, refer to our comprehensive guide and understand the process and requirement further.