In Singapore, you are required to register a business if you are engaged in an activity on a continual basis for the purpose of gain or making money. A sole proprietorship is the easiest and simplest business structure in the country that you can register to do business. Once the business is stable, you can register a company with the Registrar of Companies.
To help you understand the difference between a sole proprietorship and other company registration options available, let us look at its advantages and disadvantages.
Full Control of the Business
As the sole owner of the firm, you will have complete control of all its operations including decision making. That is, you do not have to consult third parties before implementing changes unless you deem it necessary.
Ease of Setting Up
A sole proprietorship is one of the easiest and inexpensive business entities to set up in Singapore. This is one of the reasons why most local entrepreneurs start off as sole business owners before upgrading to an LLC or public company.
No Profit Sharing
Since you are the sole owner of the company, there are no shareholders, all profits or income accrued is yours.
Least Compliance Requirements
Once you register as a sole proprietor, you only need to renew your membership annually, and you are not obligated to file tax returns every year.
Ease of Termination
Since you are the sole decision maker in the business, terminating it is easy, less time consuming and inexpensive as compared to private and public companies that have shareholders and directors.
No Separate Legal Entity
There is no separation between the business owner and the business. This means that you are fully liable for all debts and legal actions filed against the business. Your liability is unlimited, and creditors can legally sue you or obtain court orders to claim your property and personal assets to recover the money owed.
No Corporate Tax Incentives and Benefits
Singapore government offers generous incentives to companies in a bid to promote their growth and sustainability. As a sole proprietor, you are not eligible to tax incentives and benefits. Taxes are calculated based on your personal income, and you do not benefit from special tax benefits that private limited companies enjoy.
Finally, a sole proprietorship is only an option to local business owners. Foreigners who want to do business in the country are required to incorporate a private limited company. Some of the documents and information that you need to submit when registering a sole proprietorship include:
- The proposed business name
- Description of activities to be undertaken
- Local business address
- A copy of your Singapore ID
- Local residential address
- Declaration of compliance and statement of Non-disqualification
Unlike other company incorporation options, the process of registering a sole proprietorship can take one day since the process is computerized.