Starting a business in Singapore is an ideal option, as the country boasts a second place in the World Bank’s Ease 2020 rankings of the easiest country to do business in. This high ranking can be attributed to the simple and hassle-free process to set up a new company in Singapore. Prior to starting a business, the necessary step you have to take is to register company in Singapore. Regardless of whether you are an aspiring entrepreneur or experienced business owner, we will explore what are the 5 things to know before you consider registering sole proprietorship in Singapore.
5 things to know before registering sole proprietorship in Singapore
#1 What is Sole Proprietorship?
- A sole proprietorship is the simplest business structure in Singapore. It involves only one owner and there are no partners in the business, whereby the owner can be an individual, a company or a limited liability partnership.
- A sole proprietorship is not treated as a separate legal entity from the sole proprietor. This means that the owner and the business are considered as one. As there is only one owner, the owner has unlimited liability and is fully liable for all the debt repayments and liabilities of the company. Moreover, the sole proprietorship cannot register another legal entity such as a partnership, and it can sue or be sued in the owner’s name.
#2 Pros & Cons of registering sole proprietorship in Singapore
- Before deciding to choose sole proprietorship as your business structure, it is crucial to take into account your business activity, tax obligations as well as potential personal liability. Here are some pros and cons of registering a sole proprietorship:
Pros of registering sole proprietorship in Singapore
Simple set up process
- Due to the simple set-up process and compliance norms, the sole proprietorship is a popular entity type among numerous first time and small entrepreneurs. It is the least costly and easiest type of company to incorporate. This can be attributed to the minimal requirements for a sole proprietorship, which includes minimum paid-up capital of $1, a company secretary, a resident director, a shareholder and a Singapore registered office address. Moreover, owners of sole proprietorships are not required to audit their accounts or file annual returns with ACRA. The termination process of a sole proprietorship is hassle-free and inexpensive too.
Control over the company
- As you are the sole owner of the sole proprietorship, you have complete control and decision making power over all business affairs without the interference of external parties. You do not have to worry about individuals who might act against the interests of the business.
Cons of registering sole proprietorship in Singapore
- As the owner of the sole proprietorship has unlimited liability, the liabilities of the business are extended to the owner. Unlike a private limited liability company, the personal assets of the owner are not protected from the liabilities of the sole proprietorship business. In the event that the business incurs any loss, liability or debt, the owner of the business will risk their personal assets being claimed by creditors. Therefore, due to the unlimited nature of sole proprietorship, it is only suitable for small single-owner type businesses that carry minimal risks.
Challenging to raise capital
- Sole proprietors may find business expansion to be difficult and limited as capital is limited to their personal funds and the business profits. This means that the owner has to rely on their own abilities to meet up capital and resource requirements to grow the business. As there is a low public perception of sole proprietorships, it will be difficult to attract investors to raise funds or employ qualified employees for your business. Therefore, this will limit the potential growth and development of the business.
- The registration of a sole proprietorship is not perpetual as it needs to be renewed annually and it will be terminated with the death or disqualification of the owner.
- As sole proprietorship does not constitute a separate legal entity, taxes of the business are determined at your personal income tax rate. If the owner of the sole proprietorship is an individual, profits of the sole proprietorship are treated as income of the individual and the business owner will pay taxes through their personal income tax. This means that sole proprietorships are exempted from corporate tax incentives that are provided to companies such as private limited companies.
#3 Who can set up sole proprietorship in Singapore?
- To register a sole proprietorship in Singapore, individuals have to be at least 18 years old and they must either be a Singapore citizen, Singapore Permanent Resident or an EntrePass/Employment Pass holder. Additionally, it is mandatory for Singapore citizens and permanent residents to register for CPF and have sufficient funds in their Medisave account if they wish to register or renew their business registration.
- Foreigners who are residing overseas are not allowed to register a sole proprietorship in Singapore. However, they can appoint at least one nominee resident director and have to engage a registered filing agent to submit the application via BizFile+.
#4 Procedures to register sole proprietorship
- The process to start a business in Singapore is simple and hassle-free. To set up a sole proprietorship in Singapore, you will have to register your company with the Singapore company regulator ACRA (Accounting and Corporate Regulatory Authority).
- Prior to sole proprietorship registration, here are the documents you will need to prepare:
- Approved business name
- Description of principal activities
- Local office address for the proposed business (Where required, with approval from the relevant authority)
- Copy of Singapore ID for the owner
- Local residential address of sole-proprietor
- Statement of non-disqualification and declaration of compliance with regulations
- After your sole proprietorship business has successfully been incorporated, the link to a business report in which you can find the details of your new business will be emailed to you.
Reservation of business name
- A business name has to be registered with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore prior to company registration. This can be done via the BizFile+ portal. There are certain rules that must be followed when choosing the name of your business. For example, you are not allowed to register a name that infringes on an existing trademark or which is an already existing name of a business in Singapore. The name application costs $15 and name approval takes approximately an hour if all guidelines are met. After the name is approved, it can be reserved for up to 120 days, after which it will be released if the business does not incorporate using that name in the specified period.
- For sole proprietorship, it is mandatory to provide a local Singapore address as the business address, as using a P.O. Box address as the address of the business is not permitted. Under the Home Office Scheme, you can use your residential address as the business address but it is necessary to obtain approval before your business registration with ACRA. If you are residing in a HDB flat, you will need to seek approval from the Housing Development Board (HDB). If you are residing in a private residential property, you will need to seek approval from the Urban Redevelopment Authority (URA).
#5 Corporate Bank Account Opening
- After you complete your Singapore company registration, it is vital to open a corporate bank account as you will need one to carry out your business transactions, protect your assets, and meet annual accounting and tax filing requirements. Your company can open a multi-currency corporate bank account with reputable banks in Singapore including DBS, OCBC, UOB, Standard Chartered, HSBC and Citibank.
How we can assist you in registering sole proprietorship in Singapore
Singapore company registration is hassle-free if you are familiar with the entire incorporation process. Tetra Consultants strives to provide our clients with a seamless experience when setting up a company in Singapore. Our team of experts will ensure that your Singapore company can be operationally ready as soon as possible.
Contact us to find out more about Singapore company registration. Our team of experts will revert within the next 24 hours.