A Guide to Registering a Sole-Proprietorship in Singapore
What is a Sole Proprietorship?
A sole proprietorship is a company run by a single person or another registered company. It is the most straightforward business structure to start up. The majority of first-time and small firms select this structure because it is simple to establish and has very few regulations, it is also more cost effective.
Singapore, Asia's Business Hub, has a robust business environment. From huge multinational businesses to small sole proprietorships, Singapore offers the whole range of company structures and sizes. All profit-making operations that are carried out on a regular basis must be registered.
In order to set up or establish a sole-proprietorship in Singapore, you need to register with ACRA (The Accounting and Corporate Regulatory Authority), who is the registering and regulatory authority for Sole proprietorships in Singapore.
How to register a Sole Proprietorship in Singapore
The Business Names Registration Act (BNRA) governs the registration of Sole Proprietorships. The Business Registration Act was repealed by the Business Names Registration Act, which took effect on January 3, 2016. Individuals and businesses must register each business name under which they conduct business in Singapore.
Individuals or firms that conduct business in their own names are not required to register with ACRA. For example, Mr. Kevin, an independent tutor, provides an invoice to his pupils in his name if he offers services; as a result, Mr. Kevin is exempt from registering his company with ACRA. He would only be required to register with ACRA if he were to send out an invoice under a formal business name "Excel Tuitions".
Breakdown of a Sole Proprietorship
Lacks Legal Identity:
A limited liability partnership (LLP) is formed by filing the Articles of Organization with state authorities. The incorporation does not create a separate legal identity for it. It is considered to be one and the same as the owner. Because it lacks legal identification, it can neither sue nor be sued in its own name, nor may it own property.
Validity/ Renewal:
Renewal of registration is necessary. Before the registration expires, it must be renewed and may be done for one year or three years at a time.
Eligibility:
A Sole proprietorship may be formed by anybody who is at least 18 years old. A sole proprietorship can also be established in Singapore.
Singapore citizens and Permanent Residents who are self-employed must register for CPF and top up their Medisave account in order to register or re-register their company.
Management:
A manager must be appointed in the case of non-residents who are not living in Singapore to ensure that legal standards are met and to accept notices served and respond to them.
The manager must be at least 21 years of age and lawfully resident in Singapore. A citizen or permanent resident of Singapore, as well as foreign workers with employment passes or dependent passes, are considered to be lawfully residing in Singapore.
Registered Address:
A physical address in Singapore must be registered. Residents of Singapore can use their residential address as a registered office address after obtaining permission from the relevant organisation (HDB in the case of public flats and URA in the case of private residences). Virtual office addresses can also be used.
Taxation:
Individual owners' chargeable earnings are taxed at their own personal income tax rates, while company proprietors' chargeable revenues are classified as company profits and taxed at corporate tax rates.
Restriction:
A sole proprietorship is not a legal entity, therefore it can't register another legal entity such as a partnership.
Continuity:
With the death or disqualification of the owner, a sole proprietorship will come to an end.
Required Documentation for Registering a Sole Proprietorship
- Qualified Company name
- Outline of primary business activities
- Local business address (including approvals from the relevant authority)
- Copy of Singapore ID for the owner
- Sole-proprietor residential address in Singapore
- Compliance Declaration and Statement of Non-Disqualification
Usually, the registration takes less than a day, but if the agency must forward the application to additional government agencies for evaluation, it might take up to two months. However, this is an uncommon event.
After registration, the owner is notified by mail and given a registration number. A company profile including all of the needed information may be found here.
You may open an account with any of Singapore's numerous or international banks if necessary. We propose creating a separate account to keep track of income and all financial transactions. Using a personal account for business transactions would result in accounting mistakes.
Compliance after Registration is complete
The registration number must be included in all business correspondence materials, such as letterheads and invoices. ACRA must be immediately informed of any variation in registered information.
If a company's registration is revoked or the registrar terminates it, it is illegal to continue operating the business. Sole proprietorships are exempt from annual audit and do not have to submit annual financial statements to ACRA.
The owner must submit an annual income return to IRAS, which includes the business's income and earnings. At least five years' worth of records and accountings are required.
Important Factors
Unlimited Liability:
The owner is personally liable for any debts or liabilities that result from the business. The owner's obligation is limitless and personal assets can be seized in the case of a claim against a firm's loss, liability, or debt.
Raising Capital is Difficult:
The sole proprietorship has a negative impression on the company's expansion plans and, in general, attracting investors or lenders is difficult. It's tough to find good workers. Banks may demand personal assets of the owner as collateral for loan approvals. The owner must meet all capital and resource requirements single-handedly while growth is dependent solely on the owner's talents
Taxation:
A sole proprietorship is not a legal entity for tax purposes, therefore it is not eligible to receive the reduced corporate income taxes or the tax incentives available in Singapore. It should be mentioned that owners of sole proprietorships are subject to a personal tax rate (0% to 22%) on their chargeable earnings.
However, the rate at which individuals and firms with taxable incomes of S$100,000 and $10,000 or less are taxed only 4.25%. The greatest corporate tax rate is 17%.
Lacks Continuity:
The proprietors must renew their registration annually and it ends with the owner's death or bankruptcy. In the event of a licensee's death, insolvency, or termination, the licenses granted to the sole proprietor will become invalid as well. The company's assets cannot be transferred in full.
Considerations for International People:
If they want to stay outside of Singapore, they must designate a local manager. Before registration, foreign nationals must obtain permission from MOM. Sole proprietorship applications are not eligible for the EntrePass and solo entrepreneurs are unlikely to be able to acquire an employment pass.
Benefits of Sole Proprietorship:
The simplicity and ease with which a single proprietorship may be formed are the primary incentives. Small company owners may manage their operations more easily and cost-effectively due to the minimal post-registration compliance requirement.
The single owner has total control and authority over all business decisions. External parties may not interfere in corporate actions, which they claim to have control or voting power over. It is, however, ideally suited for small enterprises with a low-risk profile who wish to operate independently.
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