Singapore offers a good selection of business structures for aspiring entrepreneurs who are looking to launch their first business ventures, and one of these is a sole proprietorship, which is one of the most popular types of business models. But while it’s an attractive option to choose, it’s still important that you learn more about it to truly understand both the benefits and the risks that come with it.
What is a Sole Proprietorship?
A sole proprietorship is a company that is owned and controlled solely by one individual or entity, such as a company or a limited liability partnership. This means that there are no partners in the business, but this also comes with the following legal implications:
- A sole proprietorship is not a separate legal entity from its owner
- A sole proprietorship’s owner carries unlimited liability for all the company’s debts and losses
- A sole proprietorship can sue or be sued in the owner’s name
If, for any reason, the owner of the sole proprietorship wishes to take in partners, investors, or stakeholders, then he or she must restructure the sole proprietorship to become either a partnership or a limited liability company.
Who Can Set Up a Sole Proprietorship in Singapore?
The following conditions must be met before one can set up a sole proprietorship in Singapore:
- An individual must be at least 18 years old
- An individual must be a Singapore citizen, permanent resident, or an eligible FIN holder. However, FIN holders will need to check with the relevant authorities to confirm their eligibility before proceeding with the registration process.
Can a Foreigner Set Up a Sole Proprietorship in Singapore?
Foreigners living outside of Singapore can register a sole proprietorship company in Singapore as long as they’ve appointed at least one authorized representative. The authorized representative must meet all of the following requirements:
- The authorized representative must be a natural person
- The authorized representative must be at least 18 years old
- The authorized representative of full legal capacity
- The authorized representative must be locally resident in Singapore (e.g. a Singapore citizen, permanent resident, or pass holder)
Aside from having an eligible representative, foreigners must also engage the services of a registered filing agent, such as a law firm, accounting firm, or corporate secretarial firm, to complete the incorporation process on their behalf, since only Singpass holders can do this. Foreigners who want to be present in Singapore for the management of the sole proprietorship must also get approval from the Ministry of Manpower after successful incorporation.
What are the Advantages and Disadvantages of a Sole Proprietorship?
There are many benefits to starting a sole proprietorship in Singapore. Here are some that you can expect:
- In a sole proprietorship, the owner enjoys complete autonomy and control over business operations, allowing him or her to retain full control over every aspect of the business.
- Since sole proprietorships don’t have any shareholders, all profits and earnings generated by the company will belong solely to the owner.
- Sole proprietorships come with fewer compliance obligations. Some examples of these obligations that sole proprietorships can forego include Annual General Meeting minutes, maintenance of the company constitution, and account audit reports.
- For individuals starting a business in Singapore, a sole proprietorship offers a manageable and straightforward option. It provides an opportunity to enter the market with minimal regulatory burdens and overhead costs, allowing for easy scalability and potential growth over time.
However, there are also some disadvantages and potential risks that you must consider before starting a sole proprietorship. Aside from the legal implications stated above, here are some other things to keep in mind:
- A sole proprietorship exempts you from any corporate tax perks in Singapore
- A sole proprietorship does not allow you to acquire real estate properties under its name
- A sole proprietorship may limit your company’s growth potential, in that you won’t be able to trade stakes in the company.
How to Set Up a Sole Proprietorship in Singapore
Sole proprietorship registration is done through the Accounting and Corporate Regulatory Authority (ACRA). Here are the steps to set up a sole proprietorship:
Step 1: Reserving a Business Name
Before you can start the incorporation process, you need to register a business name through ACRA’s BizFile+ website, which will cost SGD 15. In this process, you’ll also need to specify your company’s primary and secondary business activities by choosing the right Singapore Industrial Classification (SSIC) code.
Once your business name has been approved, it will be reserved for 120 days. Failing to register your business within this timeframe will render the business name registration void.
Step 2: Choosing a Business Address
To register a sole proprietorship, you’ll also need to provide a business address. It’s worth noting that P.O. box addresses can’t be used as your business address. Home businesses will require the following additional approvals:
- Home Businesses: You’ll need the approval from the Home Office Scheme
- HDB Flat: You’ll need the approval from the Home Office Scheme and the Housing Development Board
- Private Residential Property: You’ll need the approval from the Home Office Scheme and the Urban Redevelopment Authority
Aside from an eligible business address, you’ll also need to provide a residential address. You’ll also have the option to register an alternate address at this point, but you can also do it during incorporation or at any other time. The alternate address is meant to let the public identify the people behind your business and will be kept in ACRA’s public records.
Step 3: Submitting an Application to ACRA
Once you’ve completed the previous steps, you can now log onto ACRA’s BizFile+ online portal and register your sole proprietorship. You’ll need to pay a registration fee of SGD 100. If there are no issues with your submitted application, then your sole proprietorship may be approved within 15 days after the payment of the registration fee. However, sole proprietorships that require approval from other government agencies may take anywhere from 15 to 60 days.
It’s worth noting that you’ll need to acquire the consent of any authorized representative you may be working with on BizFile+ before you can proceed with the registration process. You also have the option of working with a registered filing agent, such as a law firm, accounting firm, or corporate secretarial firm, and have them submit the application on your behalf.
What’s Next After Registering a Sole Proprietorship in Singapore?
Here are some things that you can do after you’ve successfully registered your sole proprietorship:
- Receive a Free Business Profile: Newly incorporated businesses will receive a free business profile through email. This profile contains details about your new business and can be easily downloaded through a URL.
- Secure Relevant Licenses and Approvals: Some businesses that carry on certain activities will need to acquire further licenses and approvals from other government agencies.
- Acquire a Unique Entity Number: All new businesses are issued a Unique Entity Number (UEN) that will serve as the company’s identification number for all transactions with government agencies. Alternatively, you can also get a Special UEN from ACRA, which will let you choose your UEN from an approved list for a fee.
Easier Incorporation with WealthBridge
It can be difficult to get your sole proprietorship off the ground, especially with all the overwhelming processes, requirements, and applications that you’ll need to deal with. Fortunately, WealthBridge is here to ensure that your Singapore company incorporation experience goes as smoothly as possible. Our professionals have helped incorporate a wide range of businesses across different industries, and we’re more than ready to help you out!
Beyond incorporation, WealthBridge offers tax advisory services designed for sole proprietors and small businesses aiming for smooth, compliant operations. Our tax consultants support new business owners in managing regulatory requirements effortlessly, making WealthBridge a valuable partner in building a solid foundation for your business in Singapore. Visit WealthBridge Corporate Services Pte. Ltd. for the complete list of services.