article/Sole Proprietorship

Incorporation

Sole Proprietorship

The simplest form of business structure, a sole proprietorship is a business owned by an individual or company. The sole-proprietor has absolute ownership and authority in the management of the business.

Packages & Fees

Characteristics

The key characteristic of a sole proprietorship is that the business does not have a separate entity from its owner. This means that under the law, the business and the proprietor are one and the same. It also means that the owner has unlimited liability: while he owns all the assets and profits of the business, he is also personally responsible for all debts and liabilities incurred by the business. If his business incurs debts or fails, his business creditors have the rights to claim the proprietor's personal assets. The business also cannot own property in its name. Profits are taxed at the proprietor's personal income tax rate for an individual, or corporate tax rate for corporations.

A sole proprietorship is suitable for businesses that have negligible risks and is owned and run by one person, such as freelancers, independent contractors and other small businesses.

Compliance Requirements

Owner A single individual (at least 18 years old) or a corporation can be the owner of a sole- proprietorship. 100% local or foreign ownership is allowed. However, bankrupts and persons convicted of offences involving fraud or dishonesty are not allowed to register.
Business Name A Business Name (in English) that cannot be identical or similar to another business name or existing trademark, or contain any offensive or vulgar words, and requires ACRA approval.

Registered Address registered office address in Singapore and cannot be a PO Box.
Manager At least one manager who is an ordinarily resident in Singapore (at least 18 years old and not disqualified under the Companies Act).

Pros and Cons of a Private Limited Company

The proprietor has absolute control over the business, including all decisions on transactions, contracts and business strategies. He does not need to form a board of directors or get in other shareholders.
Sole proprietorship is quick and easy to set up, with a one-time registration.
There are low registration cost and fewer regulatory obligations and restrictions compared to a private limited Company.
There is no statutory requirement for general meetings, share allotments, etc.
Less paperwork and other formalities are needed, which translates to minimal legal and government filing fees.

It is one of the riskiest business structures because the proprietor personally bears all risks and liabilities, even if any negligent or fraudulent acts are committed by his employees.
It is a lot harder to attract capital investment or obtain loans from financial institutions as sole proprietorships are often seen as a risky investment.

As your business grows or needs investments or loans to further its expansion, you may wish to convert your sole proprietorship to a private limited company. Please visit our Converting Sole Proprietorship to a Private Limited Company page for more information.

Note

VOPlus can advise you on the most suitable type of business entity for your business and help you convert a private limited company in Singapore promptly. Contact us today for a consultation!