As a sole proprietor can i have employees

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To learn about various types of business entities in Singapore, refer to Guide to Business Structures in Singapore.

Sole proprietorship is the simplest form of business structure in Singapore. However, it is suitable only for very small single-owner type business that does not carry any risks. Unlike a private limited liability company, a sole proprietorship does not provide limited liability protection and your personal assets are not protected from business risks.

Sole-Proprietorship – Quick Facts

• A sole proprietorship in Singapore does not constitute a separate legal entity therefore it is not distinct from the owner/proprietor. The business owner is personally accountable for all liabilities incurred during the course of the business.
• Any Singapore registered company or a natural person of at least 18 years of age is eligible to register a sole proprietorship.
• Sole proprietors must appoint at least one manager who is a natural person of at least 21 years of age and who is ordinarily resident in Singapore – a Singapore Citizen or a Permanent Resident. In most cases, the owner himself/herself will act in this capacity.
• A local Singapore address must be provided as the business address for the sole proprietorship. Under the Home Office Scheme, residential premises can be used as a business address but owners must seek written approval from HDB (for HDB properties) or URA (for private properties) to use their homes (owned or rented) for home office use.
• Singapore citizens or PRs registering for a sole proprietorship must ensure that their Medisave accounts have sufficient funds before proceeding with the registration.
• Profits of the sole proprietorship are treated as income of the individual who owns the entity, thus it is subjected to a tax rate as that of personal income, and where the owner is a private limited company, the profits will be subjected to corporate tax rate.
• As a Singapore sole proprietorship is not a legal entity, it cannot register another business firm
• Sole proprietors must ensure that all letterheads, invoices, bills or other documents used for the purposes of doing business have the registration number listed.
• Sole proprietors do not need to audit their accounts or file annual returns with ACRA as any profits will be taxed as personal taxes.
• Raising funds or expansion options as a sole proprietorship will be limited because investors will hesitate to deal with non incorporated entities.
• Any changes to the particulars of the business must be lodged with the Registrar within 14 days from the date of change
• Registration of Singapore sole proprietorship needs to be renewed annually.

Considerations for Foreigners

Sole proprietorship is not an option for foreigners. Foreign business professionals should incorporate a private limited company instead. For further details about private limited companies, refer to Singapore company registration guide.

Documents Required and Registration Procedure

In order to register a sole proprietorship business in Singapore, the following documents/information are required:

• Proposed business name
• Description of principal activities
• Local business address for the proposed business
• Copy of owner's Singapore ID
• Local residential address of sole proprietor
• Declaration of compliance and Statement of Non Disqualification

Registration procedure involves a) reserving the name; and b) registration of the business. The registration procedure is computerised and quick. Registration of sole proprietorship can be completed within 1 day, provided all the documents are lodged properly with due endorsements. However, if the name or the nature of business requires referral to another authority, it may take up to a few weeks. Examples of businesses that may be referred to relevant authorities include financial, media, educational services, etc.

To maximise chances of speedy name approval, make sure that it

• is not identical or too similar to any existing local company or business names
• does not infringe any trademarks or copyright
• is not obscene or vulgar
• is not already reserved

Documents Issued by ACRA

Once you have submitted the sole proprietorship business registration application and if everything is in order, the registrar will send an email notification confirming the successful registration along with the registration number. Singapore government does not issue a hard copy registration certificate anymore by default as the electronic copy is valid and acceptable in Singapore.

After you have received the email notification of successful registration, you can retrieve the business profile for your new Singapore sole proprietorship that contains important registration information. The original email notification of business incorporation along with the business profile are the two important documents that you will need in Singapore to open a business bank account, sign an office lease, obtain a business phone line, etc.

Bank Account Opening

After registering the sole proprietorship in Singapore, a bank account can be opened in any of the several international, foreign and local banks in Singapore. The business can open separate accounts of various currencies or a single multi-currency account. The account opening procedure varies across the banks and most banks require the business owner to be present in person during account opening. Typically, the following documents will be required:

• Account application
• Copy of owner's Singapore Identity Card
• A latest print-out of the business profile for sole proprietorship
• Minimum deposit (varies from bank to bank) in cash or cheque

Sole Proprietorship Advantages

• Ease of setting up: It is the easiest and least expensive business structure to set up.
• Owner Control: As a sole proprietor you are in complete control of all the business affairs including decision making.
• No profit sharing: You accrue all income generated by the business.
• Ease of termination: Terminating a sole proprietorship is easier, less time consuming and less expensive than other business entities.
• Least compliance requirements: You are free of the obligation of filing returns annually and only need to renew your membership every year.

Sole Proprietorship Disadvantages

• No separate legal entity: You are inseparable from your business. This makes you financially and legally responsible for all debts and legal actions against the business.
• Unlimited liability: Creditors may sue you for debts incurred and can also obtain a court order to claim against your personal assets, including your property.
• No corporate tax benefits or incentives: Taxes are determined at your personal income tax rate and you do not enjoy special tax benefits that are available to a private limited company.
• Limited capital: Capital is limited to your personal finances and the profits generated by the business. Thus, business expansion is limited and difficult.
• No perpetual succession: The business lives and dies with you as you and the business are one and the same thing
• Low public perception: This entity is the least preferred for serious businesses as nobody would be willing to lend you large sums of money. It is also difficult to attract high-caliber employees, or senior level executives who usually look for a more advanced form of business structure such as a private limited company.
• Sale/transfer of all or part of the business: You can transfer the business only by the sale of business assets.

In Summary

Sole proprietorship is the basic no-frill type of entity suitable for businesses with no or little negligible risk. This type of business entity essentially meets the statutory requirement to register all profiteering activities carried out on a continuous basis. Freedom from compliance formalities and undivided authority is a merit but also the limiting factor for potential growth and development. Due to the unlimited liabilities, we do not recommend sole proprietorship to business professionals. Instead, we recommend that they set up a Singapore private limited company.