Many organizations that track the business friendly policies of countries have consistently ranked Singapore very highly for the ease of incorporating a new business including sole proprietorship in the country. In 2016, Singapore was ranked by the World Bank as the best country of the world in its “Doing Business” category. This was Singapore’s tenth consecutive year in the World Bank survey.
In the previous articles, we have talked about setting up a Limited Liability Partnership and Limited Partnership in Singapore. If you are thinking of starting your own business on a small scale, not settled about the future direction and you are doing it alone, it is probably advisable for you to set up a sole proprietorship instead. You can convert it into a private limited company later when the business has become stable and is going into expansion.
A sole proprietorship is a business owned by one person and the business owner is also known as a sole proprietor. He/ She will have absolute control and say in the business, including the management and day to day running of the business.
A sole proprietorship is the easiest and least costly of all the business structures to set up. Administration and management will be easier too and all profits generated by the business will go to the owner directly. Unlike companies, sole proprietors have lesser compliance requirements and do not need to perform annual reporting.
However, in a sole proprietorship, the business and its owner are considered a single legal entity. This means that the business owner is personally responsible and liable for all the debts incurred by the business and any legal action taken against it. He/ She can be sued personally and has unlimited liability. It might also put the owner’s personal assets at risk.
Here are 4 main steps on how to set up a Sole Proprietorship in Singapore:
1. Registration Requirements
Any Singapore citizen, Permanent Resident (PR) or EntrePass holder who is 18 years and above, is allowed to register for a sole proprietorship in Singapore. From 1 January 1994, all Singapore citizens and PRs are required to top up their Medisave accounts with CPF Board before registering for a sole proprietorship. Identification documents are also required.
2. Choose A Company Name
Even though it seems like an easy process, there are strict rules and regulations governing the usage of names for businesses. Eg. Offensive or vulgar names are not allowed, no two businesses are allowed to have similar or identical names due to possible infringement of copyright and trademark protection issues. No national symbols may be used like “Merlion”.
3. Choose A Physical Address
Sole proprietorship applicants are required to notify the Accounting and Corporate Regulatory Authority (ACRA) of the business’s principal address where day to day operations will take place. If applicants wish to use their residential address to register their business, they need to apply for the Home Office Scheme with the Housing and Development Board (HDB).
4. Appoint A Local Authorized Representative (Only When Necessary)
The Business Name Registration Act 2014 has stated that where an individual proprietor, all the partners of a firm or all the officers of a foreign company do not reside in Singapore, they must appoint at least one authorized representative who resides in Singapore, at least 18 years of age and holds full legal capacity.
5. Register Online
The registration can be done online through the BizFile+ website. There are 2 registration fee options of S$115 (1 year) and S$175 (3 years) to choose from. Once payment is made, the sole proprietorship will be set up within 15 minutes.
Should the application be sent for a review prior approval, the process can take from 14 days to 2 months. Approved business names are only reserved for 60 days and an alternative office address may be reported to ACRA for a fee of S$40.
In summary, sole proprietorship is the most basic business structure and is suitable for small businesses with no or little negligible risk. Although there are lesser compliance requirements and absolute authority over the business, sole proprietorship is generally not recommended to business professionals.