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How to set up a sole proprietorship in Singapore

If you’re looking to start your own business in Singapore, a sole proprietorship is the simplest and most common way to do so. Here’s what you need to know.
Published 23 Sep 2022
Updated 29 Sep 2022
9 min read
woman wrapping a bunch of flowers at a florist

Are you a freelance writer or graphic designer? Always dreamed of creating your own clothing brand, selling craft merchandise, or establishing a home-based florist — but don’t know how and where to start? We’re here to help!

If you’re looking to set up and run a small business on your own, setting up a sole proprietorship would be an ideal choice — you can always choose to convert it to a private limited company later on when business picks up.

Alternatively, if you’re looking to go into business with one or more partners, forming a partnership would be more suitable instead.

You might be wondering…

Do I even need to register my business?

You will have to register a business if you are above 18 years old, and carry out an activity for profit on an ongoing basis.

There are exemptions, though — if you choose to conduct your business using your full name as per your NRIC (for e.g. Nichole Choo Xin Yuan), or conduct business with one or more partners using their full names as per their NRICs, then you will not need to register your business.

However, if you choose to use your name to carry out your business, but add descriptive words to it (e.g Notebooks by Nichole Choo), you will still have to register your business.

For the full list of exemptions, check out Section 4 of the Business Names Registration Act.

What is a sole proprietorship?

woman writing on a notebook in a florist

A sole proprietorship is essentially a business that can be owned by an individual, company, or limited liability partnership. There are no partners in the business, and it is not a separate legal entity from the business owner.

This means that the business owner, also known as the sole proprietor, has unlimited liability — which entails being personally liable for all debts and losses of the business. Both the business and the owner are considered to be a single legal entity, and hence they can be sued personally, which will put their personal assets at risk.

What are the eligibility requirements for a sole proprietorship business registration?

If you’d like to set up a sole proprietorship, you need to be:

  • At least 18 years old; and
  • A Singapore citizen, Singapore permanent resident, or an eligible FIN holder (like an EntrePass holder).

If you are a FIN holder, we recommend checking with the relevant pass issuing authority — either the Ministry of Manpower (MOM) or Immigration Checkpoint Authority (ICA) on your eligibility first.

You will also need to top up your Medisave account or ensure you have sufficient Medisave funds with the CPF board before you can register a business, become a new owner of an existing business, or renew your business registration. This is because as a sole proprietor, you do not receive regular MediSave contributions from employers, and hence it is important to contribute regularly to ensure sufficient MediSave savings for future healthcare needs.

Should you start a sole proprietorship?

If you’re still ruminating on whether to set up a sole proprietorship in Singapore, let us lay out the benefits and drawbacks for you, so you can properly evaluate them before making a decision.

Advantages of a sole proprietorship

A sole proprietorship is the easiest way to start a business. The set-up costs are the cheapest compared to other options, it only requires minor administrative work, and you can get it approved very quickly.

All profits generated from the business go directly to you, the sole proprietor. It also makes decision-making for the business much more efficient as you are in complete control.

Unlike companies, sole proprietors also enjoy fewer compliance requirements, which takes a lot of time and stress off your shoulders. Sole proprietorships are exempted from annual audit, which means filing annual financial statements with the Accounting and Corporate Regulatory Authority (ACRA) is not required.

The profits are treated as your personal income, and thus any profits will be taxed as your personal taxes. You simply have to file an annual income return with IRAS, inclusive of the revenue and profits of the sole proprietorship.

It is also much easier to terminate your business, as opposed to closing a company. You can simply let your business permit expire, or file a ‘cessation of business’ application on ACRA.

Disadvantages of a sole proprietorship

The main disadvantage, which we briefly mentioned above, is that a sole proprietorship does not provide limited liability protection. Your personal assets will not be protected from business risks, and you will be held accountable for any liabilities incurred.

If you incur any debts in the course of your business, you will have to be prepared to fork out the amount yourself, if the business is unable to do so. You may also face the risk of bankruptcy from creditors of your sole proprietorship.

Another important thing to take into consideration is the fact that your options for expansion or raising funds as a sole proprietorship will be limited, as investors are unlikely to deal with non incorporated entities. But there’s always the option to convert your sole proprietorship into a private limited company if you’re keen to take the business further.

How to register a sole proprietorship in Singapore

woman writing on a notebook in a florist

1. Name your sole proprietorship

Now that you’re embarking on a new business venture, choosing the name of your sole proprietorship is the most important part! Feel free to unleash your creativity, but be mindful that there are strict rules regarding the usage of names for businesses.

Businesses aren’t allowed to have similar or identical names due to copyright laws and trademark protection issues, so choose your name wisely. It goes without saying, but avoid names containing expletives, or any words that are vulgar and offensive. Some names (e.g. Temasek) are also prohibited by order of the Minister for Finance. You can refer to ACRA’s Policy Statement on the Treatment of Business Names and Name Complaints for more guidance.

Once you have decided on a name for your business, conduct a search on BizFile+ to check if it’s available. If it’s available, you can proceed to register it on BizFile+, where it will generally be approved immediately. Once approved, it will be reserved for 120 days — you’ll have to register your business within this period, or else the name will no longer be reserved and made available to everyone else.

Take note that your name application may be referred to relevant authorities for review, if it contains words such as ‘school’, ‘legal’, ‘finance’ or more. The processing time for this will take anywhere between 2 weeks to 2 months.

You will also be required to specify the primary and secondary activities of your business. Select the most relevant Singapore Standard Industrial Classification (SSIC) code according to the business activity you intend to start.

2. Have a valid local business address

You’re required to notify ACRA of the principal address where the business will be conducted from. If you’re using a home address to register your business, you’ll have to apply for the Home Office Scheme or Home-Based Business Scheme with the Housing Development Board (HDB) if you’re living in a flat. If you’re living in a private property, you’ll have to apply for the Home Office Scheme or Home-Based Business Scheme with the Urban Redevelopment Authority (URA).

The main difference between the two schemes is that the Home Office Scheme allows you to run your business from your flat with up to two non-resident employees, whereas the Home-Based Business Scheme only allows the business to be operated by owners, registered occupants, or tenants. Third parties and non-resident employees are not allowed to work in the property — so keep that in mind when deciding what should be your registered office address.

The Home-Based Business Scheme also does not require approval by HDB or URA.

3. Appoint a local authorised representative (if necessary)

This only applies to foreigners who are residing overseas but want to register a sole proprietorship in Singapore. They will have to appoint at least one local authorised representative, which can be a Singaporean citizen, permanent resident, or EntrePass/Employment Pass holder at least 18 years of age, and resides locally in Singapore.

4. Submit an online application to the Accounting and Corporate Regulatory Authority of Singapore (ACRA)

The last step left is to register the sole proprietorship online through the Bizfile+ website.

You can also choose to engage a registered filing agent (e.g. law firm, accounting firm, or corporate secretarial firm) to submit the online application on your behalf.

What documents do I need to register for a Singapore sole proprietorship?

Here’s a quick checklist of what you’ll need before you kickstart the registration process:

  • Approved business name
  • Intended primary and secondary business activity and description
  • Local business address (With approval from relevant authorities if required)
  • Copy of the owner’s Singapore ID
  • Local residential address of sole proprietor
  • Declaration of compliance and Statement of Non-Disqualification

How long does it take to register a Singaporean sole proprietorship?

Once you’ve paid the registration fee, your sole proprietorship should be set up within 15 minutes! However, if your application needs to be sent to other authorities for further review, it might take up to 2 months.

Once you’ve registered successfully, you will be issued a registration number, and be able to retrieve your business profile online via Bizfile+.

How much does it cost to set up a sole proprietorship?

The name application fee costs $15, while the registration fee costs $100. Remember that you must renew your business registration before it expires if you intend to continue running the sole proprietorship.

You can renew your business registration up to 60 days before it expires, which will cost $30. You will also have to ensure that your Medisave contributions are up-to-date and paid, otherwise your business registration will not be renewed, or might even be cancelled.

Can a sole proprietor hire employees in Singapore?

woman talking to employee at a florist

Yes you can — there is no limit to the number of employees you can have, and you’re able to hire both local and foreign employees too.

Before you embark on the hiring process, it’s important to be aware of the hidden costs of recruitment, and find the most cost-effective ways to hire new employees into your business. As a small business, budgets can be tight and you’ll want to make every dollar worth your while.

You might also want to consider hiring contractors instead of employees, depending on the needs of your business. A contractor could be more suitable for additional help on an ad hoc basis, whilst an employee would be more suitable for part-time or full-time assistance with the business.

For more information, refer to our guide on hiring employees in Singapore.

Managing HR and payroll as a sole proprietorship business owner

Running a business all on your own isn’t easy, not to mention post-registration compliance. You have to ensure that all business communication materials (e.g. letterheads and invoices) have your registration number stated clearly, any change in registered details must be reported to ACRA, and it’s mandatory to keep records and accounts for at least 5 years.

And if you choose to hire employees, you’ll have to keep up with compliance and legislative updates on top of already complex employment laws. That’s in addition to all the other areas you need to take care of to keep the lights on for your business.

Juggling multiple roles as an entrepreneur can often leave you strapped for time, but as the business scales, HR and payroll compliance become a crucial part of business success. If neglected, it will lead to disastrous consequences. Why not leverage on Employment Hero’s all-in-one HR and payroll software to give you peace of mind?

By automating manual tasks, Employment Hero helps to save up to 80% of administration time — freeing up resources so you can focus on more strategic priorities. You can recruit, hire, onboard, engage, develop, recognise and reward your employees — all without ever leaving the platform. We’re also IRAS compliant, so you can feel confident each payroll run with streamlined CPF calculations and SDL deductions.

For more helpful resources, refer to our essential guide to HR compliance or our guide to payroll in Singapore.

The Team
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