Sole Proprietorship in Singapore
6 minute read A Sole Proprietorship is a type of business that has only one owner who manages all of its assets and liabilities. A Singaporean Citizen or a Permanent Resident may register a Sole Proprietorship. A Sole Proprietorship is not considered a separate legal entity. Owners are legally responsible for all liabilities against the firm.
- What is a Sole Proprietorship?
- Who can register for a Sole Proprietorship in Singapore?
- Advantages of a Sole Proprietorship
- What are the documents required?
- How to register for a Sole Proprietorship in Singapore?
- What’s the difference between a Sole Proprietorship and a Private Limited Company?
- How much does it cost to register for a Sole Proprietorship?
- How to close a Sole Proprietorship in Singapore
- How to convert a Sole Proprietorship to a Private Limited Company
What is a Sole Proprietorship
Setting up a sole proprietorship in Singapore is a great way to start a business with minimal risk and cost. A sole proprietorship is a type of business owned by one person, also known as the sole proprietor. This type of business does not constitute a separate legal entity from the owner, which means that the owner has full control over all aspects of the business.
The process for registering a sole proprietorship in Singapore involves getting a name, paying registration fees, appointing an authorised representative and other necessary steps. It is important to note that foreign individuals and companies may also register a Sole Proprietorship but must appoint an authorised representative who is either a Singapore citizen or a permanent resident.
Once registered, the sole proprietor will be responsible for all aspects of the business, including any debts or liabilities incurred by it. It is advisable to obtain professional advice when setting up a sole proprietorship as well as when running one, to ensure the business is properly managed. The individual should also consider obtaining appropriate business insurance to protect against potential losses and damages.
The Singapore government provides various financial schemes and incentives for small businesses, including tax reliefs and grants. Additionally, businesses in Singapore can take advantage of the low personal tax rates as well as access to a wide range of free trade agreements. Businesses may also benefit from generous payroll support measures offered by the government, such as CPF contributions from employees and employer’s CPF contributions.
To ensure compliance with all applicable laws and regulations in Singapore, such as accounting standards and taxation requirements, the sole proprietor should make sure they are familiar with the relevant rules and regulations. A good accountant or bookkeeper can help ensure that taxes are filed correctly and on time which is a crucial aspect of operating a successful business in Singapore.
As a sole proprietorship has only one owner, it is important that the individual document their decisions with regard to running the business clearly so that their future plans are well-defined. This includes drafting contracts between the owner and any suppliers or customers involved in any transactions taking place within the scope of their business operations.
Advantages of a Sole Proprietorship
There are a few advantages of registering a Sole Proprietorship in Singapore:
The sole proprietor enjoys all profits
The most rewarding advantage of this business structure is that all profits generated by the business will go solely to the business owner, regardless of whether they choose to reinvest into their business or enjoy it personally. By employing a sole proprietorship business structure, business owners have the potential to reap even greater rewards than normally possible with other business structures. This can open up opportunities to grow their operations that weren’t previously possible under other business models.
A sole proprietor can sell or transfer the business as per his wish.
Being a business owner of a sole proprietorship in Singapore has numerous benefits, and one of the biggest is the ability to sell or transfer the business as per one’s wishes. This level of business freedom is unique to sole proprietors since they are uniquely situated within Singapore’s business structure.
Sole proprietorship is advantageous because business owners can easily regulate business proceedings without needing all the paperwork associated with setting up other business structures. Furthermore, they can pass on their business to their heirs legally, ultimately allowing them to cherish their hard-earned success for many years to come.
Profit is taxed at the personal income tax rate and there is no corporate tax.
As a sole proprietor in Singapore, you will be afforded both personal and tax advantages. The most significant perk is that your profits are taxed at the lower personal income tax rate, as opposed to a business’s corporate tax rate. This means that owners of small businesses can keep more of their earnings for themselves, making being a sole proprietor all the more attractive.
Additionally, there is no corporate or double taxation, which saves entrepreneurs time and money filing taxes.
A sole proprietorship business is easy to administer and manage.
Being a sole proprietor in Singapore has many advantages that make it an attractive business structure for entrepreneurs. The primary benefit is the ease of administration and management of a sole proprietorship; owners are the only point of contact and all decisions are made independently without consulting or involving any other person. This simplifies the process of running the business, as there is no need to worry about finding reliable partners or investors and negotiating contracts with them.
Furthermore, running a sole proprietorship has less paperwork, avoiding some tedious administrative procedures associated with other types of businesses and thus saving time and resources. In addition, as the owner is personally liable for any debts and losses incurred by their business, personal assets such as bank accounts are not tied to it unlike with other more complex corporate structures. Therefore, being a sole proprietor in Singapore allows a great degree of flexibility and control over operational decisions while having clear legal protection at the same time.
There are minimum administrative responsibilities and compliance requirements
One of the biggest benefits is there are minimal administrative responsibilities and compliance requirements to fulfill.
One example of this is that there is no need to form a corporate body and filing annual documents to Singapore’s ACRA (Accounting & Corporate Regulatory Authority) does not apply for sole proprietorships.
Furthermore, as your business income will be registered under your personal income tax, any losses incurred can be used as deductions to reduce taxes.
With such minimal bureaucratic tasks, this gives you more time to grow your business and spend your energy on other areas such as marketing efforts or perfecting the product or service you are offering.
Who can register for a Sole Proprietorship in Singapore?
In Singapore, anyone 18 years or older who is a Singaporean citizen or Permanent Resident (PR) can register for a sole proprietorship.
All they have to do is fill up the required application form and submit it to the Accounting and Corporate Regulatory Authority (ACRA).
Foreign individuals and companies may also register for a sole proprietorship as long as they are equipped with the appropriate documents along with an EntrePass or Employment Pass.
In this case, the individual must provide details on their local residence address and ensure that the same resident manager is used throughout the duration of their stay in Singapore.
It is also important to note that foreign entities are only allowed to register if they have secured at least one of these passes; otherwise, ACRA will decline their application.
What are the documents required?
Singaporean locals wishing to register a sole proprietorship must acquire several documents before they can proceed with the application process. This includes an original valid identity card or passport, a notification of business registration through BizFile+ for sole proprietorships, and proof of employment if necessary.
Additionally, applicants should also provide a copy of their personal bank account statement as well as all relevant information such as name, registration number and address, etc. Lastly, those enrolling in the Central Provident Fund must submit an Inland Revenue Authority of Singapore (IRAS) form with their application.
Those who are not citizens or permanent residents must also fulfill additional criteria such as providing references from local banks, obtaining a valid business address in Singapore, and appointing a resident manager.
Once all the necessary documents have been submitted and approved, ACRA will issue an official Business Registration Certificate (BCR) which acts as proof that the sole proprietorship has been established in Singapore. This certificate should be kept safe by the proprietor as it may be required for various legal procedures such as opening bank accounts or registering for goods and services tax (GST).
Finally, since running a business in Singapore carries certain financial obligations such as filing yearly taxes, it is advisable to seek professional guidance from a qualified accountant when registering for a sole proprietorship. This will help ensure that all procedures are met correctly within specified timelines and that reporting requirements are fulfilled accurately each year so as to avoid any possible penalties or fines. Therefore, regardless of whether you are an individual or company wishing to register for a sole proprietorship in Singapore, it is essential that you understand the relevant regulations beforehand so you can make sure your venture runs smoothly.
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How To Register a Sole Proprietorship in Singapore
Setting up a sole proprietorship in Singapore is an easy yet important process that requires special attention.
Step 1: Choose a name
To begin, one should register the business with the Accounting and Corporate Regulatory Authority (ACRA) which involves getting a name for your business. The name needs to be unique, and no offensive or vulgar names will be accepted.
You can use our name checker tool to assess if your company name is unique.
Step 2: Choose an address
You would need a principal address as the main registered address for your business application in ACRA. If you would like to use your home address, you would need to apply for the Home Office Scheme with HDB.
Step 3: Appoint a local authorised representative (only applicable to foreigners or individuals not living in Singapore)
If a sole proprietor, all partners of a company, or all officers of a foreign company do not live in Singapore, it is necessary to designate at least one authorised representative.
If you are a sole proprietor who resides outside Singapore, you must designate a local authorised representative who meets the following requirements:
- be at least 18 years old
- have full legal capacity
- be a permanent resident in Singapore.
Step 4: Register with BizFile+
Congrats, you are well on your journey to becoming a business owner! The last step would be to register through the BizFile+ portal, and pay registration fees online. The setup and approval process can take 14 days to 2 months.
- Can I use my personal bank account for my sole proprietorship business?
- No, you cannot use your personal bank account for your sole proprietorship business in Singapore. You must open a separate business bank account to manage your business transactions.
- Are there any other things I need to take note of?
- There are several other compliance requirements that must be met when registering a sole proprietorship in Singapore.
- preparing financial statements on an annual basis to ensure ongoing compliance with applicable laws and regulations for your accounting and taxes
- setting up a separate bookkeeping system
- engaging professional services to audit accounts periodically; as well as
- filing annual returns with ACRA
In addition to these steps, it is recommended to obtain professional advice regarding the formation and maintenance of your sole proprietorship in order to optimise operations while remaining compliant with local regulations at all times.
Need advice for business compliance?
I would like to hire employees as a sole proprietor
If your sole proprietorship intends to employ staff members or foreign workers in Singapore, then additional registrations may be required such as registering for Central Provident Fund (CPF), Work Injury Compensation Insurance (WICA) or Foreign Workers Levy (FWL).
These processes need to be completed in addition to those mentioned earlier before starting operations officially.
What’s the difference between a Sole Proprietorship and a Private Limited Company?
When deciding to start a business in Singapore, it is important to understand the differences between a sole proprietorship and a private limited company.
This table outlines the key differences between the two types of business structures in detail:
|Feature||Sole Proprietorship||Private Limited Company|
|Legal Status||No separate legal entity from its owner||Separate legal entity from its owner as defined under the Companies Act 1965|
|Ownership||Ownership does not have to be formally documented; One individual has full control of the business||Arrangement for ownership needs to be formally documented; Shares can be transferred with restrictions set by law|
|Liability||Personal assets are at risk if business fails; Unlimited liability||Limited liability for shareholders and directors; Shareholders are liable up to only their share capital amount at most|
|Compliance Requirements||Minimal filing requirements, no annual audit needed (e.g. registration with Accounting and Corporate Regulatory Authority (ACRA))||More compliance requirements to meet, including filing annual returns, auditing accounts and appointing secretaries|
|Taxation Rates & Requirements||Income tax paid at the prevailing rate of up to 20% with deductions applicable such as personal reliefs or expenses pertaining to trade/business activities||Corporate tax rate of 17%, subject to income criteria/qualifications & ability of company’s profits/activities being taxed locally in Singapore|
|Funding||Difficult to obtain funding from external sources||Easier to obtain funding from external sources such as banks due to greater assurance of limited liability for loan repayment|
How much does it cost to register for a Sole Proprietorship?
Incorporation specialists like Sleek can help you to register for your Sole Proprietorship easily at S$150.
If you’re interested to register your Sole Proprietorship, talk to our team today to get started.
How to close a Sole Proprietorship in Singapore
To close a Sole Proprietorship, a sole proprietor must notify ACRA about its decision to cease all business operations. The company must log in to BizFile+ using their Corppass, for the “Cessation of Business” transaction online. The business will stop functioning immediately after the cessation application has been submitted.
How to convert a Sole Proprietorship to a Private Limited Company
When you are ready to expand your business, it is recommended to convert your Sole Proprietorship to a Private Limited Company. This will help to support your increasing business operations and growth – which includes the ability to tap onto government grants and funding, keep your personal and business assets separate, access to corporate tax incentives and exemptions.
Step 1: Prepare a no objection letter
The owner of a Sole Proprietorship firm must write a letter stating that they have no objection using the business name for a Private Limited Company.
Step 2: Incorporate your Private Limited Company
You can start a Singapore company with the following setup requirements:
- At least one individual/corporate shareholder
- $1 as paid-up share capital (in any currency)
- A company secretary
- One Singapore resident director
- A local registered office address in Singapore
Step 3: Transfer your assets
Additionally, all business assets must be transferred to the newly incorporated company. It is important to immediately transfer assets from an existing business to the new company and close the Sole Proprietorship within a period of three months.
Take note of the following:
- Open a new bank account under the Singapore Private Limited Company. Hereafter all checks and bank transfers must be made in the name of the Private Limited Company.
- Re-sign the contracts, leases, or service agreements that were previously signed under the Sole Proprietorship.
- Re-apply new licenses and permits that are not transferable otherwise.
Step 4: Close your Sole Proprietorship
Finally, you can shut down your Sole Proprietorship, and proceed to inform ACRA about the termination.
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