What is a Sole Proprietorship?
A Sole Proprietorship is the simplest form of business structure in Singapore. Usually, it is suitable only for very small single-owner type business that does not carry any risks. This entity is considered a single ownership type of business and the owner will not have limited liability protection, where his assets will not be protected from any business risks.
For example, in Singapore, if you are engaged in any activity that is carried out on a continual basis for the purpose of gain, you must register a business (such as sole proprietorship, private limited company, or limited liability partnership).
What is the difference between a Sole Proprietorship against a Partnership or registered Limited Company?
One of the main difference would be, both the Limited Liability Partnership (LLP) and Private Limited Company are considered as a separate legal entity. Whereas a Sole Proprietorship is not.
Amongst the many differences, this would mean that the business owner of the Sole Proprietorship will have unlimited liability during the course of the business.
For an in-depth comparison, please see our article here.
Advantages of a Sole Proprietorship
- Easy and straight forward to setup –– the easiest and least expensive business structure to set up.
- Full 100% ownership ––A Sole Proprietorship provides the owner complete and absolute control of all their business affairs and decision making.
- Full ownership of income. No profit sharing.
- Terminating a Sole Proprietorship is easy and straight-forward less expensive than other business entities.
- Lowest compliance requirements –– aside from business registration renewal, there is almost no other compliance matters that is required.
Disadvantages of a Sole Proprietorship
- Not a separate legal entity. Business owner is financially and legally liable for all debts and legal courses against the Sole Proprietorship
- Unlimited liability and credits may claim against your personal assets should the Sole Proprietorship be insolvent.
- Taxed according to the personal income tax rate. No corporate tax incentive or benefits.
- No perpetual succession. In the event of death of the business owner, the Sole Proprietorship ceases as well.
Required Documents & Registration Process
The registration procedure consists of 2 main parts:
- The name reseveration and application
- Registration of the Sole Proprietorship.
The registration procedure is computerised and quick. If all required documents are submitted with the respective endorsements, the process should be completed within a single day.
After which, most business owners would then want to open a new Bank Account for their business transactions. These business bank accounts can be opened as separate accounts of various currencies or have the option of opening as a single multi-currency account, depending on the preference of the owner.