In Singapore, forming a sole proprietorship is one way to benefit from the country’s diverse business ecosystem. And as it turns out, this is a popular option, especially now that entrepreneurs from all over the world are flocking to Singapore to join the party.
Some praise the low cost of forming a sole proprietorship in Singapore. Others laud it for its overall ease and convenience, which is said to set it apart from the rest of the corporate structures accessible.
However, some people believe that sole proprietorships are the riskiest business structure in Singapore.
So, which one is it? And, if you decide to try it out, how do you even register a Singapore sole proprietorship?
That is, after all, the topic of this piece. It delves into the notion of a single proprietorship firm before guiding you through the process of forming one in Singapore.
As a result, by the end of the process, you’ll have a thorough understanding of all the documents and credentials required to register a sole proprietorship in Singapore.
Most importantly, you’ll be able to make an informed decision about whether to persist with forming a sole proprietorship in Singapore or to abandon it in favour of a more appropriate organisational structure.
What Is The Meaning Of Sole Proprietorship?
A sole proprietorship is a type of business that allows individuals to run their businesses. That means the owner handles all the company’s operations, makes all the business choices, and operates it all by himself.
In comparison, both Limited Liability Companies and Partnerships are required by law to have more than one stakeholder.
It doesn’t stop there. In Singapore, sole proprietorships are so individualistic that they can’t possibly expand to accept new stakeholders.
Other parties can only be introduced once the firm has been reformed and changed into a legal partnership or limited liability corporation.
That is to say; you should not expect to attract investors soon. Selling a portion of the company will not allow you to increase your capital.
Another unfavourable aspect of sole proprietorships in Singapore is that they carry unlimited liability. The Accounting and Corporate Regulatory Authority (ACRA) will not recognise the business as a different entity from you, even though you’ll be operating under a business name.
You and the company essentially merge into one entity. As a result, every company liability becomes a personal liability. Even any corporate debts or losses you incur will automatically impact your assets.
Of course, this would leave you in a difficult position if the sole proprietorship’s creditors brought legal action against it. But unfortunately, the Singapore legal system appears to allow creditors to seize your assets to recoup debts.
As a result, if you’re running a high-risk firm, you might want to avoid forming a sole proprietorship in Singapore.
Not only that, but there’s more. This corporate structure is strongly discouraged for small and medium-sized businesses. It doesn’t allow for the long-term growth that the organisation needs.
A sole proprietorship, on the other hand, isn’t all awful. It also has an entirely opposing positive side, which may persuade you to proceed with forming a sole proprietorship in Singapore.
Why Do You Need To Form A Sole Proprietorship?
The most appealing aspect of this form of business is the complete independence it provides. If you set up a sole proprietorship in Singapore, you can rest assured that you will have complete control over your business.
You won’t be sharing any of the company’s profits, either with anyone. Every single dollar earned by your sole proprietorship business is yours to keep.
You can also forget about submitting your business taxes while you’re enjoying the profits. Singapore does not levy corporate income taxes on sole proprietorships.
But don’t be fooled by it. Because, as it turns out, the Singapore Inland Revenue Authority (IRAS) isn’t going to let you off so easily.
IRAS prefers to merge your business revenue with your income rather than imposing a corporate tax. So you’re left with only one source of income to report.
And while we’re on the subject, corporate income tax isn’t the only thing you won’t have to file. Setting up a sole proprietorship in Singapore relieves you from many corporations’ compliance duties.
For example, you don’t have to keep track of and submit AGM minutes. Even seemingly essential information, such as the company’s constitution or audited financial statements, is not necessary.
So you should have no trouble forming a sole proprietorship in Singapore and keeping its compliance status over time.
The Benefits Of A Singapore Sole Proprietorship Company
- The registration process is refreshingly simple, cost-effective, and easy to understand.
- IRAS does not levy corporate income taxes. Instead, it permits you to file both your business and personal income tax returns.
- You are the single owner of the company’s profits.
- There aren’t a lot of company compliance requirements.
- The company’s owner has complete control over the company.
- It’s simple to change it to a partnership or a limited liability business.
- You are not required to audit the company’s books.
The Drawbacks Of A Singapore Sole Proprietorship Company
- It does not insulate you from the commercial liabilities that come with it.
- The corporation’s name cannot be used to purchase real estate.
- It misses out on Singapore’s business tax incentives.
- Trading a part of the firm isn’t going to help you build your business capital.
- The company may die along with its founder.
- Administrative responsibilities can easily overwhelm you.
Registration Documents Required To Set Up A Sole Proprietorship Company In Singapore
The following documents are required to register a sole proprietorship in Singapore:
- A Non-Disqualification Statement.
- A statement of agreement.
- Proof of your current living address in the area.
- A copy of your Singapore identification card
- A brief description of your company’s physical location.
- A statement that summarises the main business activity.
- A business name that has been approved.
You can begin the registration procedure once you’ve met all of these fundamental requirements.
Business registration in Singapore? Click here.
Singapore’s Step-by-Step Guide To Registering A Sole Proprietorship
1. Choose A Creative Business Name
Picking a unique name for your sole proprietorship business is the first step. This will eventually be the brand name under which your business will operate. As a result, you should tackle the situation with a great deal of finesse and inventiveness. Choose a name that best describes your company and its activities without infringing on any copyrighted names.
2. Enter The Address Of Your Sole Proprietorship.
In Singapore, all types of businesses, including sole proprietorships, must have a valid local address. So, go ahead and name the official address where the company will be based.
This should not be mistaken with your home address. ACRA would only allow you to use your home address after applying for the HDB Home Office Scheme.
3. Identify A Local Authorised Representative (Only Under Specific Circumstances)
If you are currently residing in Singapore, this is not for you. If that isn’t the case, the legislation compels non-residents to appoint a Singapore-based approved representative. The person must be at least 18 years old and have full legal ability.
4. Use BizFile+ To Complete The Registration Process Online
The final step is to go to ACRA’s BizFile+ business registration platform and register the sole proprietorship with the information you’ve gathered.
Sole Proprietorship Registration Costs
This service is not free. The name application alone will cost you $15, while a one-year registration will cost you $100. You can also pay $175 to extend your registration time to three years.
Regardless of which option you choose, the entire process of forming a sole proprietorship in Singapore should take no more than 15 minutes. You can then give ACRA 14-60 days to assess and accept your application once you’re finished.
What About Sole Proprietorship Registration For Foreigners?
Foreigners are not permitted to register as sole proprietors. Instead, foreigners who want to start a business should form a private limited company.
However, if you already live in Singapore, you’ll need to get authorisation from the Ministry of Manpower (MOM), which will require a SingPass or CorpPass account, as well as meeting other requirements, including having a local sponsor who is a Singaporean or PR.
The Next Difficult Journey After Registration
In all honesty, the registration process is merely the first and arguably the easiest stage in the long process of establishing a business in Singapore.
Annual renewals and associated compliance duties (such as tax filing) and vital business activities must all be considered (like accounting and payroll management). And even if you manage to get the hang of it all, don’t expect things to get any easier. As you get busier operating the business, the tasks will continue to pile up.
A Sole Proprietorship’s Taxation
A sole proprietorship is not regarded as a firm entity, even though it is a tax resident, and hence, its profits are taxed at the owner’s income tax rates. Singapore’s income tax rates for resident taxpayers are progressive, ranging from 0% to a maximum of 22% for income over SGD320,000. On the other hand, Singapore has a maximum corporate tax rate of 17%.
Self-employed sole proprietors are those who have registered with the Accounting and Corporate Regulatory Authority of Singapore (ACRA). When someone makes a living through trade, business, profession, or vocation, they are considered self-employed. All self-employed people must record their business income as business income rather than wages, which is included in their total personal income.
Need help with accounting and taxation? Check out our Accounting and Taxation packages.
Setting A Bank Account
A bank account can be opened in any of Singapore’s foreign and local banks after a successful single proprietorship registration. It can either open many accounts in different currencies or a single account in a single currency. Although different banks have different account opening procedures and regulations, the following documents should be prepared in general:
- Application for Account Opening
- A copy of the owner’s Singapore identification
- The most recent printout of the single proprietorship’s business profile
- Minimum Deposit Requirement (depends on the bank)
In the end, a sole proprietorship appears to be a worthwhile investment for individual’s looking to start their business journey in Singapore. You might begin with one and gradually improve as your company expands.
Furthermore, this technique allows you to get experience with the entire Singapore business sector before moving up to the higher ranks of partnerships and LLCs.
Read more about choosing the right business structure in Singapore.