What Is Sole Proprietorship?
It is a type of business where there is a single owner who takes control of all aspects of the company. This includes making all business decisions and managing daily operations. While limited to one owner, it’s not uncommon for them to employ a staff team.
Regarding the legal setup, there are some marked differences to other business structures, such as Limited Liability Companies (LLC) and Partnerships. These structures legally require more than one stakeholder; however, sole proprietorships cannot introduce other parties.
Another big difference is that a sole proprietorship is not a separate legal entity from the owner. This means that all the assets and liabilities are the owner’s responsibility, so all business liabilities are personal liabilities rather than limited to a fixed sum, as in an LLC.
Pros and Cons of a Sole Proprietorship in Singapore
Consider your options and look at the pros and cons compared to other business types, such as limited companies.
Private limited companies (Pte Ltd) are a popular choice for their flexible and scalable structure. If you’re unsure whether to choose a sole proprietorship or Pte Ltd, use our guide or read up on company registration in Singapore.
- You have complete control and autonomy
- All profits go to you rather than shareholdersIt is easy and cost-effective to register for sole proprietorship
- You don’t have to file corporate income tax to the IRAS – instead, you file business returns along with your personal income
- If you want to go down the route of incorporating a company in Singapore later on, this can be done easily
- There’s no requirement to audit your accounts
- As you have no protection from business liabilities, creditors will chase you directly for payment of debts
- You will miss out on corporate tax benefits and incentives
- You may become overwhelmed with responsibility
- It can be hard to raise funds as investors are often reluctant to support non-incorporated entities
- Hiring senior-level executives may also be difficult due to a lower public perception of this type of entity
Documents Required and Registration Procedure
If you’re asking yourself how to set up a sole proprietorship, the first step is to gather together all the necessary documents and information for the process. These include:
- The proposed name for your business
- A description of the main company activities
- The local address where it will be registeredA copy of your Singapore ID
- Evidence of your local residential address
- Declaration of compliance and Statement of Non-Disqualification
You must be at least 18 years old to register a firm for proprietorship, and you must also be one of the following:
- A citizen of Singapore
- A permanent resident in Singapore
- An eligible FIN holder (check on your eligibility before registering)
If you’re self-employed, make sure you (top up your Medisave account) with the Central Provident Fund Board before you register.
Unlike a limited company, there is no requirement for sole proprietorship incorporation in Singapore since it is an unincorporated business. However, you are required to register online, which we’ll cover next.
Steps for Setting Up as a Sole Proprietor
The procedure for proprietorship firm registration online usually takes less than a day. Sometimes, it can take longer if referred to other government departments for review.
Once registered, you’ll get a registration number which must be used in communications like letterheads and invoices.
Reservation of name
First, you’ll need to choose a name. This must be approved by the Accounting and Corporate Regulatory Authority (ACRA), and there are certain requirements, so you’ll need to think carefully.
Follow these tips to avoid any delay in your registration:
- Choose a unique name
- Do not infringe any trademarks or copyright
- Avoid anything that might be interpreted as offensive or inappropriate
- Make sure the name is not already reserved
Remember that the name you select is also part of your brand, so be creative in your approach and make sure the name reflects your values and offerings.
If unsure, use a tool like the Singapore Company Name Check search tool to see if your name is already taken.
It costs $15 to register your chosen name, and once it’s approved, it will be valid for 120 days. Make sure you reapply to keep your name within this time frame, or you will have to complete the process again, and the name could be snapped up by another operation in the meantime.
Providing a local address is an important part of the registration process — this must be a physical address, not a P.O. Box address.
If you intend to work from home, you can use your home address as the main business address. To do this, you’ll need to apply to the Home Office Scheme and get approval before submitting your registration to ACRA. You will also need written permission from the Urban Redevelopment Authority (URA) or the Housing & Development Board (HDB) to use your home as an office.
Even if you’re not working from home, you must submit your residential address. ACRA will list both addresses on its website, so be aware that this will be available to the public.
Now you have gathered all the required information, it’s time to register your sole proprietorship online. You can do this through ACRA’s filing portal called BizFile+. You’ll need to log in and use SingPass. It will ask you to endorse your consent, which is needed before the business can be registered.
If there is no SingPass, the alternative is to appoint a registered filing agent like a law firm, accounting firm or corporate secretarial firm. Don’t forget that Osome can help with corporate secretarial services in Singapore, helping to track deadlines, file documents and keep things on track.
The annual cost to register for a sole proprietorship is $100, or you can pay $175 for three years. Renewal fees are $30 thereafter.
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Considerations for Foreigners
Setting up this kind of business can be complex for foreigners, and it may be easier to incorporate a private limited company.
If you are set on the idea, then follow these guidelines:
- Foreigners who live abroad: appoint at least one resident authorised representative and use a registered filing agent to file your application
- Foreigners living in Singapore: apply for approval to register in front of the Ministry of Manpower
What Is Next After Registering in Singapore?
When your application has been approved, you will receive an email with a registration number. You’ll also receive a Unique Entity Number (UEN) to use with government agencies.
Keep these details safe, as they may be required for other aspects of running your operations. For example:
- Opening a business bank account
- Signing an office lease
- Setting up a phone line
You may require licences or approvals from other government agencies, too — visit the GoBusiness Licensing portal to check.
Don’t forget to stay up to date with your operations. Tasks to keep on top of include:
- Annual business name renewals
- Filing financial records
- Keeping Medisave contributions with the CPF Board up to date
Do I need to register for a sole proprietorship in Singapore?
If you’re involved in any ongoing activities in Singapore that aim to make a profit, then you must register as a business. You’ll need to choose the best model for you, which could be a sole proprietorship, or it could be another type, such as a Pte Ltd or limited liability partnership.
Do sole proprietors need to register with ACRA?
ACRA is a government regulatory authority that processes all applications in Singapore. If you’re involved in ongoing profit-making activities, you must register on its BizFile+ portal as part of the application process. If you are using an authorised representative to submit your application, they must do the same.
Do I need a business bank account for a sole proprietorship in Singapore?
You don’t need a business bank account to apply in Singapore. However, once you are fully registered, you’ll be able to open one with any of the international, foreign and local banks in Singapore. It’s a good idea as it allows you to keep business and personal expenses separate and track your cash flow.
Do sole proprietors pay income tax in Singapore?
As you aren’t considered a company entity, you don’t have to file corporate income tax to the IRAS – instead, it is determined at your personal income tax rate. This can range from 0% to a maximum of 22% if your income exceeds SGD320,000. This means that you do not benefit from the incentives available to a Pte Ltd.
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