Sole proprietorship is considered as the most basic type of business structure in Singapore. This is ideally recommended for small businesses owned by a single individual. It is easy to set up, takes minimal costs and simple compliance requirements. Thus, it is the favoured entity type for most first time and small entrepreneurs
General Characteristics of a Singapore Sole Proprietorship
A sole proprietorship in Singapore constitutes a combined legal entity with its owner/proprietor – they are one and the same. There is no distinction between the two which makes the owner/proprietor personally responsible or accountable for all liabilities incurred for the entire duration of the business.
Any Singaporean natural person or permanent resident of at least 18 years of age can register a sole proprietorship. A Singapore registered company is also eligible to register a sole proprietor type of business.
Registration of Singapore sole proprietorship needs to be renewed annually.
If the eligible individual seeking to incorporate a sole proprietorship is self-employed, he or she is required to prove there are sufficient funds in his or her Medisave account before registering this type of business entity. He or she must also be an active or current CPF member.
If a sole proprietor type of business is registered by a foreign individual or company, it is required to designate at least one manager. The manager must be at least 21 years of age, a natural person, and an ordinarily resident in Singapore. He or she must be any of the following:
- a Singapore citizen
- a Singapore permanent resident
- an Employment Pass holder
- an EntrePass holder
- a Dependants’ Pass holder
Most of the time, the owner/proprietor assumes the role of the manager as well.
The business address for the sole proprietor type of business must be a local Singapore address and cannot be a PO Box.
If the owner/proprietor intends to use his or her residential premises as business address, he or she must obtain written approval from URA (for private properties) or approval from HDB (for HDB properties) to meet the regulation set by the Home Office Scheme.
Registration Requirements and Procedure
Registration procedure for sole proprietorship can be completed within a day for as long as the requirements are met accordingly.
These are the information and/or documents necessary for registration:
- Proposed business name
- Description of principal activities
- Local business address for the proposed business
- Copy of Singapore ID for the owner
- Local residential address of sole-proprietor
- Declaration of compliance and Statement of Non Disqualification
If the proposed business name or the nature of business requires referral to relevant authority (such as in educational services, media, finance, etc.), completion of registration procedure may take from a few days up to a few weeks.
Opening of a Bank Account
Upon successful registration, the owner/proprietor is now entitled to opening an account with any of the local, foreign, or international banks in Singapore. Having a separate bank account for purely business transactions is essential for maintaining a clear system and upholding transparency of financial transactions and revenue records.
Advantages of Sole Proprietorship
- Simple and straightforward formation. Sole proprietorship is the easiest type of business entity to set up or incorporate.
- Complete and independent authority. The owner/proprietor has complete control and autonomous decision-making powers in all of its business affairs.
- Least compliance requirements. Unlike other business structures, a sole proprietorship only has to renew its membership annually. There are no filing returns or legal obligations to worry about.
- No profit sharing: The owner/proprietor is the only individual entitled to all income, profit, and revenue generated from all business transactions.
- Uncomplicated closure. Termination of a sole proprietorship requires less time, effort, and cost as compared to all other business structures available.
Disadvantages of Sole Proprietorship
- The owner/proprietor has no distinction from its business, making him or her accountable both legally and financially for all debts, liabilities, and legal actions against the business.
- The owner/proprietor is at high risk of acquiring multiple and unlimited lawsuits from creditors and of losing all personal assets including any type of property.
- The owner/proprietor won’t have the privilege of getting special tax benefits that other types of business entities are enjoying.
- The owner/proprietor relies on his or her own personal finances as the main source of capital.
- The sole proprietorship has lower public perception as compared with other types of business entities which makes it difficult to gain confidence of creditors, employees, and stakeholders alike.
How Corporate Services Singapore can Help in your Singapore Sole Proprietorship Registration and Set Up
Registering a Sole Proprietorship in Singapore can be done with simplicity and with promptness through the skilled competence of an established company registration service provider like Corporate Services Singapore. With an excellent array of services in Accounting & Taxation, Audit & Assurance, Company Incorporation & Company Secretarial Services, Corporate Services Singapore has specialists who can answer all your queries about your incorporation needs and guide you through your business.