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 to representative offices. A sole proprietorship is a type of company where you incorporate and run your business on your own with no legal distinction between yourself and your business.
NOTE: Sole proprietorships is one of the simplest forms of companies in Singapore.
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. 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.
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
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
NOTE: FIN holders are advised to check with the relevant pass issuing authority (e.g. MOM/ ICA) on their eligibility before registering or taking on an appointment (e.g. authorised representative).
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.
Documents Required to Incorporate a Sole Proprietorship in Singapore
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 your sole proprietorship, you will need to register and reserve your ideal company name.
RECOMMENDATION: You can use our free name checker tool here to see if your company name is available! To decide on your company name and the requirements, do read our article here.
The registration procedure 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:
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
Taxation for Sole Proprietorships in Singapore
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%.
Post-Incorporation Activities for Sole Proprietorships in Singapore
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.
NOTE: All records and accounts are to be kept for at least a period of 5 years.
Thinking of starting your new business in Singapore? Reach out to us for a free consultation on Singapore incorporation, taxation, and other corporate services today.
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?Paul Hype Page2021-11-12T10:04:19+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?Paul Hype Page2021-11-12T10:03:55+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.