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Everything you need to know about Setting up a Sole-Proprietorship in Singapore

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Sole-ProprietorshipSetting up a sole-proprietorship in Singapore is perhaps the simplest process of all the incorporation processes. This is because sole-proprietorship is the simplest and the most flexible type of business structure a person can incorporate.

Few Facts about Registering a Sole-Proprietorship

  • It does not have a separate legal identity, but it covers all the compliances required to be met, to carry out any type of profit generating activities in Singapore. Moreover, the business owner remains accountable for the liabilities and debts incurred by the business.
  • In majority of cases, the owner himself acts as the manager. However, for a person to be eligible to become a manager, he/she must a resident of Singapore and must be above 18 years of age. In case, a foreigner wants to apply for registering a sole-proprietorship, he has to take approval from MOM (Ministry of Manpower).
  • If it is dependent pass holders, who want to apply for a setting up a sole-proprietorship, then he/she has to provide a letter of consent to work for their own company. They have to seek permission for themselves for working in their own company. They should not forget attesting the document with a corporate stamp.
  • The advantages of setting up a sole-proprietorship are numerous, like freedom from exhaustive compliance requirements and undivided authority. However, the only down side is its limiting nature in terms of growth and development.

Who can Register?

Any person above 18 years of age or any company can register a sole-proprietorship. However, there are a few exceptions. For instance, those with undischarged bankruptcy, or convicted for felony, may not be allowed to register such entities in Singapore. If there is any doubt, it is recommended that you either consult a professional incorporation services providing firm, or a local lawyer.

Appointing a Local Manager

  • It is mandatory for the owner to appoint a local manager, if the owner himself is not “ordinarily resident” in Singapore.
  • The owner will be deemed not an “ordinarily resident”, only if he/she does not:

o    Have a local address

o    remain in Singapore legally for a long period of time

  • The local manager that the owner appoints must be compulsorily above 18 years of age, and should be at least one of the following:

o    A Singapore Citizen

o    A Singapore Permanent Resident

o    An Employment Pass holder

o    An Approval-in-Principal Employment Pass holder

o    A Dependant Pass holder

Registration Process

It is recommended that a foreigner should engage a professional incorporation services providing firm to submit the application on their behalf.

Whereas a local or a dependent’s pass holder, a holder of any other work permit that provides a ‘SingPass’, can log into the ‘Bizfile’ portal, using the identification portal and the SingPass, and submit their application. The documents needed are as follows –

  • Proposed business name
  • Description of principal activities
  • Local business address for the proposed business
  • Copy of Singapore ID of the owner
  • Local residential address of sole-proprietor
  • Declaration of compliance and Statement of Non Disqualification
  • Singapore citizens or PRs registering Sole Proprietorship must ensure that their Medisave accounts have sufficient funds before proceeding with the registration.

Pros and Cons of Setting up a Sole-Proprietorship

Pros

  • It is seen that low-risk service businesses especially small-scale start-ups prefer incorporating a sole-proprietorship. For instance, copywriters, small retailers, pet groomers, graphic designers set up this type of company.
  • Minimal compliance requirements make incorporating and running a sole-proprietorship cakewalk. They are free from the headache of submitting their audited accounts or filing of the annual returns with ACRA.
  • Since the owner himself acts as the manager, the decision-making powers are not diluted. They remain concentrated in the hands of only one owner, who acts as the sole decision maker.
  • Owing to the structural, operational and compliance nature of this type of business, all the profits go directly and exclusively in the hands of the business owner.

Cons

  • All the costs, risk, debts and liabilities are the responsibility of the business owner. There remains no-one to share it with him. If required, the court of law can ask the owner to sell off his/her personal assets to pay off the debts and losses of the business. An entrepreneur should think twice and avoid starting a sole-proprietorship if the business involves big risks and possibly huge losses.
  • It becomes difficult for these types of businesses to raise revenue, because the finance lending institutes like banks prefer lending money to organizations that have certain size and exhibit credibility. On the other hand, if the owner still wants to borrow money as a loan, then he must be prepared to put up his/her own personal assets as collateral.
  • Raising funds by selling a stake in the business to investors, is not possible because of the nature of this type of a business. A single individual or company can only own sole-proprietorships.
  • If by any chance, the owner falls sick or faces death, the business will come to a screeching halt, because the owner and the business are one and not two separate entities.

In light of all the aspects mentioned above, it is recommended that you consult a professional incorporation services providing firm like Singapore Accounts, before taking the plunge.