With several local start-ups and home-based businesses on the rise, the number of people looking to make the shift towards pursuing entrepreneurship have also been increasing along with it.
If you want to start taking your business more seriously into the next level, sole proprietorship may be something you can look into.
What is sole proprietorship?
If you are the only owner in your business and have yet to form a business entity, you are a sole proprietor. In its simplest form, sole proprietorship is a business owned solely by one person and is one of the most basic business structures you can establish.
Most first-time small business owners would take on this business type as all of the profits generated will go to them directly and they do not have to submit compliance requirements such as annual reporting and tax returns. If you are looking to run a small-scale business that doesn't require staffing and hiring and intend to keep it that way for a long time, being a sole proprietor may be the most ideal option for you.
What are some of sole proprietorship benefits?
1. Easy and inexpensive
A sole proprietorship is one of the easiest business structures to set up and maintain. Unlike private entities and other corporations, start up costs are minimal as are the costs to obtain the necessary licenses and permits. This is why most entrepreneurs and small business owners who have plans to upgrade into a public company in the future start off as sole proprietors.
2.Complete control
Since you are the sole owner of the business, you get to make all the business decisions. You will have full control of every aspect in the business from the operations all the way to your finances without having to consult with third parties before implementing any changes in the way your business operates.
3. Zero profit sharing
Since your business setup does not require hiring of staff and other employees, there is no need for profit sharing. As the sole business owner, you are entitled to all the income generated from your operations.
4. Ease of termination
Compared to other business entities, the process of terminating a sole proprietorship is generally much easier, more inexpensive and also consumes the least amount of time. Private companies that take on other business structures take a much longer process as there are more people involved such as multiple shareholders and various business directors as well.
Who can set up a sole proprietorship?
To set up a sole proprietorship in Singapore, you have to be at least 18 years of age and must be a Singapore citizen, permanent resident or an EntrePass holder.
For expatriates and other employment pass holders who wish to set up a sole proprietorship in Singapore, there are certain limitations. They would first need to seek approval from the Ministry of Manpower (MOM) before registering and need to appoint a Singapore resident as the business manager in order to register for this business structure. Since the process is more tedious, foreigners are advised to incorporate a private limited company instead.
How do I become a sole proprietor?
To start a sole proprietorship in Singapore, you would have to register first. Some of the documents and information required to register include:
- A proposed business name
- A local business address
- A description of principal business activities
- A Singapore-based appointed representative (for foreigners only)
Since the registration process is computerised and can be completed online, the procedure should not take too long. Provided that all the necessary documentation is prepared beforehand with due endorsements, registration of sole proprietorship can be completed within one day.
What’s next?
After registration, other considerations to take into account would be to have your business registration number, necessary permits and licenses to operate, and a separate bank account for all business matters.
Once you have all of that out of the way, you are all set to begin your operations!
Frequently Asked Questions
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