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Starting Sole Proprietorships

What is a Sole Proprietorship?

A sole proprietorship is a business that can be owned and controlled by an individual, a company or a limited liability partnership. There are no partners in the business. The legal status of a sole proprietorship can be defined as follows:

  • It is not a separate legal entity from the business owner;

  • The business owner has unlimited liability (i.e. the business owner is personally liable for all the debts and losses of the sole proprietorship); and

  • It can sue or be sued in the owner’s name

A sole proprietorship or partnership is simple to set up, and less costly to administer as compared to a company. 

 
Who Can Set Up a Sole Proprietorship in Singapore

1. Singaporean, Singapore Permanent Resident (P.R.), and EntrePass Holder

To set up a sole proprietorship or partnership, you must be:

  • At least 18 years old; and

  • A Singapore Citizen, Singapore Permanent Resident, or an EntrePass Holder; and

  • An individual with SingPass or CorpPass account

2. Foreigner

Foreigners who are residing overseas and want to register either a sole proprietorship or a partnership must appoint at least one locally resident authorised representative. The foreign owner(s) must also engage an ACRA registered filing agent to do the registration.

Foreigners who are currently residing in Singapore must seek approval from the Ministry of Manpower before registering a sole proprietorship or a partnership. If any of the proposed partners do not have a SingPass account, the applicants must engage the services of an ACRA registered filing agent  to submit the application on their behalf. Only individuals with a SingPass or CorpPass account can submit an application.

An authorised representative must be:

  • A natural person;

  • At least 18 years old;

  • Of full legal capacity; and

  • Ordinarily resident in Singapore (i.e. has a Singapore residential address).

 
Choosing a Business Name

Every business needs a name to differentiate itself and to make it easy for others to find the business. The first step is to choose a suitable name and check whether if this name is available. Avoid selecting names which are:

  • identical to an existing business.

  • undesirable i.e. names which are vulgar, obscene or offensive.

  • prohibited by order of the Minister for Finance.

Note: Please read the ACRA's Policy Statement on the Treatment of Business Names and Name Complaints for more guidelines on the selection of names.

You must first apply for a business name before you can register your business entity. After the name application has been approved, the name will be reserved for 120 days. If you do not register the business or incorporate the company within this 120 days, the name will no longer be reserved and will be made available to other members of the public.

A name application may be referred to the Referral Authorities for comments (e.g. if your business name has the word “school” in it, it may be referred to the Ministry of Education for review and approval).

During the name application, you must also specify the primary and secondary activities of your business by choosing the most relevant Singapore Standard Industrial Classification (SSIC) code corresponding to your business activity. Click here to search for the relevant SSIC code.

 
 
Providing a Local Business Address

When registering a sole proprietorship or a partnership, you are required to provide your business address. A P.O. Box address cannot be used as the business address. If you are planning to conduct small-scale business from your home, you may use your residential address as the business address under the Home Office Scheme. You can apply for approval under the Home Office Scheme before you submit your business registration to ACRA.

 

If you are residing in a HDB Flat and want to apply for the Home Office Scheme must seek approval from the Housing Development Board (HDB). This can be done by submitting your application via the HDB website.

If you are residing in a private residential property and want to apply for the Home Office Scheme must seek approval from Urban Redevelopment Authority (URA). This can be done by submitting your application via the URA website.

Renewing Your Business Registration

Your business registration is valid for a period of one or three years. If you intend to carry on business, you must renew the registration before the expiry date.

Your business registration can be renewed 60 days before the expiry date. The renewal fee is $30 for one year or $90 for three years. The three-year renewal option is available if:

  • You have fully paid up your Medisave with the CPF Board, or

  • You are on a regular instalment plan (e.g. GIRO) to contribute to Medisave, and have a good record of Medisave contributions i.e. prompt Medisave contributions for up to 24 months prior to renewing the business registration, or

  • You have never been registered with CPF Board as a self-employed person

Existing business owners are encouraged to keep their Medisave contributions up-to-date. Otherwise, the business may be subjected to early cancellation.

Note: It is an offence to operate a business after the business registration has expired.

 
Other Important Information

1. Medisave Contribution for Self-Employed Persons

All self-employed persons who earn a yearly net trade income of more than $6,000 need to contribute to Medisave. This requirement is only applicable to Singaporean Citizens and Permanent Residents. Visit the Central Provident Fund Board website for more information on Medisave contributions.

An existing business registration may be subjected to early cancellation if Medisave contributions are not up-to-date.

2. Unique Entity Number (UEN)

After incorporation, every new business will be issued a system-generated Unique Entity Number (UEN). Companies must use this UEN when transacting with government agencies.

3. Licences

Depending on the type of business activity that you are undertaking, you may require licences or approvals from other government agencies. For more information, visit the GoBusiness Licensing portal.

If you do not require further licences or approvals, you can commence business immediately after you have registered with ACRA.

 
Sole Proprietorship Vs Company

There is always this question for all new business owners - 

Do I register a Sole Proprietorship or

a Private Limited (Pte Ltd) Company?

The considerations rest very much on the following factors:

 

Easier to set up: Sole Proprietorship is easier and faster to set up as compared to a Company which require the determination of directors, shareholders and share capital.

 

Costs to set up and maintain: Sole Proprietorship is both less costly to register and to maintain annually compared to a Company, which requires annual return filing, filing on any changes in company information, and engagement of company secretary.

Legal liability: Company is a separate legal entity but for Sole Proprietorship you are trading under your own personal capacity. What this means is that in the event the business is sued by other parties, you will be sued personally and are liable for all the debts owing if you are trading the business under Sole Proprietorship. In worst scenario, you can be sued bankrupt under a Sole Proprietorship business structure. However, if it is a Company you will only lose the amount you invested in the share capital of the Company and will not be personally liable for any debts owed by the business to other parties.

Tax: There are many tax benefits and incentives available to a Company and these are not applicable to a business under Sole Proprietorship. The business taxable profits are taxed at a maximum rate of 17% (excluding the tax exemptions and rebates) under a Company, while for a Sole Proprietorship the maximum tax rate is 22% under personal taxation.

Prestige and recognition: A Sole Proprietorship is not taken to be a serious business entity/ structure, this limits its ability to reach out to investors, banks, suppliers and customers, and government for investments, loans, business, and grants. A Company on the other hand is well received by all these group of stakeholders, therefore making Company the default business structure for most business owners.

For more information and comparison between the different business structure, please refer to this link.

 

IRAS Tax Guide

Company Tax Rate

GST

Tax Deductible Expenses

Non-Deductible Expenses

Personal Tax Rate

Asia Corporate Advisory

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