You might get the urge to try your hand in setting up a new business in Singapore. However, before you get your business off the ground, you must choose a business structure that best fits your need.
The structure you choose for your business has a great impact on the taxes you pay and many more things. There are four major types of business structure in Singapore – sole proprietorship, partnership, cooperative, and corporation.
One of the most accessible business structures in Singapore is the sole proprietorship. Starting a sole proprietorship company in Singapore is the easiest way to take benefit of the Singapore’s rich community. Permanent residents and citizens of Singapore can register a sole proprietorship company in Singapore. If you are a foreigner and wondering if you can register a sole proprietorship in Singapore, do not worry. By appointing a resident manager in Singapore, you can get your business officially registered.
But then again, as with any other type of business structure, there are pros and cons of forming a sole proprietorship in Singapore.
To know what are they? And how do you even register a sole proprietorship in Singapore? Well, this article aims to inform all the potential sole proprietors about the whole concept of a sole proprietorship company in Singapore, its pros and cons, and then walks you through the process of registering a sole proprietorship in SG.
What is a Sole Proprietorship?
It is a type of business that is owned by an individual person or company. The owner of such a business is known as a sole proprietor.
There is no distinction between the owner and the sole proprietorship, which makes the sole proprietor accountable for all the liabilities incurred. Similarly, profits are taxed at personal income tax rates thus giving the business owner exclusive use of his business profits.
A sole proprietorship is easy to set up and is suitable for low-risk service providers like small retailers. Singapore citizens or permanent residents can start such a company. If you are a foreign investor and want to know how to register a sole proprietorship in Singapore, here are a few points that you need to know.
You need to appoint a manager who is
- Above 21 years of age
- A Singapore resident or citizen
- An employment pass-holder
- An Entre Pass holder
- A dependent pass-holder
How to register a sole proprietorship company in Singapore?
Concerning the process of registering, it is a lot easier for you to register a sole proprietorship in Singapore.
To register a sole proprietorship business in Singapore, you require the following:
- Proposed business name – You will first need to find a suitable business name.
- The local business address for the proposed business – Next you will need to register an official business address in Singapore with ACRA.
- Appoint an authorized representative – If you are a foreign investor, then you will need to appoint an authorized representative who is a permanent resident in Singapore.
- Register with ACRA – To register with ACRA, you will need to provide the following documents:
- Approved business name
- Description of business activities
- A registered business address in Singapore
- Home address of sole proprietor owner
- Scanned copy of owner ID
- Statement of Non-Disqualification
You can make the registration online and it takes under 15 minutes. The registration can be done within 1 day if all the required documents are at hand.
- Documents Issued by ACRA – If ACRA has approved your business registration, you will be getting an email confirming your new business profile.
- Bank Account Opening – Once you have officially registered your sole proprietorship in Singapore, you should open a bank account for doing business. It is always advisable to keep your business account separate from your personal bank account.
Sole Proprietorship Advantages
- Simple and Affordable
A sole proprietorship in Singapore is flexible and easy to start. It requires less paperwork than other business structures and is generally much more affordable in terms of setup costs. You only need to fill out a simple government form along with a business name to register a sole proprietorship in Singapore.
2. Complete Authority
As a sole proprietor, you have complete control and freedom to make the decision in all business affairs.
3. Operating flexibility
A sole proprietorship is the most flexible business structure to change. You can make any change you want, including changing business policies and type of business – all without having a greater impact on either cost or process.
4. No profit-sharing concerns
When you register a sole proprietorship in Singapore, the income that is derived from your business is yours. You need not share it with your shareholders or partners. Except for the salary of your employees, anything that remains at the end of the month becomes part of your personal income.
5. Easy to close
You need to go through a series of procedures to close a sole proprietorship in Singapore. Closing a sole proprietorship is easier, less time-consuming, and inexpensive than other business forms. You just need to notify the government that your business has ceased operations.
Sole Proprietorship Disadvantages
- No tax benefits or incentives
If you own a sole proprietorship business in Singapore, then you are not eligible to receive the tax incentives or benefits. That is because the taxes you pay are based on your personal income.
2. More taxes
While the corporate tax stands at 17%, the maximum tax rate for personal income taxes in Singapore is 22% on income that is more than $320,000. If you are a owning a sole propreitorship and if you derive any income from personal sources which is more than $160,000, you become eligible for a higher taxes.
3. Unlimited liability
Being a sole proprietor, you are inseparable from your business. This makes you financially and legally responsible for all liabilities and legal actions against the business. Creditors may charge you for debts incurred and can claim against any of your personal assets.
4. Limited Capital
As the capital is limited to your personal finances and the profits derived from your business, the chances for business expansion are limited.
5. Low public recognition
The sole proprietorship is the least preferred structure for huge business as no one would be willing to give you huge sums of money as debt. It is also difficult to attract high-grade employees or senior-level executives. This is because they usually take up jobs in a more advanced form of business structure like a private limited company.
The Bottom Line
The sole proprietorship is the basic no-frill type of structure suitable for businesses with no or little negligible risk. The simple formalities for opening to simple closure of the business make it possible for anyone with an interesting idea to start a sole proprietorship business in Singapore.
However, with the help of specialists like HC Consultancy Pte Ltd (HCCS), you can start a sole proprietorship business in Singapore with ease. Apart from registration services, you can also get taxation, accounting, company secretarial services, and other corporate services in Singapore.
So, feel free to get in touch with HCCS if you need to alleviate the time and processes of setting up and running a sole proprietorship company in Singapore.