A Sole Proprietorship is a single owner business who assumes all assets and liabilities of the business. It is the most basic of business entities and the simplest one to setup and manage.
Features of a Sole Proprietorship
- It does not have a separate legal entity as such it ceases to exist upon death of the business owner
- The owner assumes unlimited liability
- A sole proprietorship business is NOT allowed to own property
- It is the most cost effective business entity to set up.
- Easiest type of business to manage because compliance requirements is minimal. Also simplest business to de-register or close.
- The business owner is taxed under Personal Income Tax for all profits generated by the Sole Proprietorship.
Setup Requirements for a Sole Proprietorship
- Minimum one owner
- A local registered office address
- Non-residents and companies must appoint at one local resident manager
- The CPF medisave account contribution must be made
Who can setup a Sole Proprietorship?
- Residents (Singapore Citizens, Permanent Residents, Work Visa holders)
- Non-residents may also do so but are required to appoint a resident manager.
Important factors for consideration
- Since the business owner is responsible for all debts and losses, his personal assets to exposed to risk .
- Corporate tax exemptions and rebates are not applicable to Sole proprietorships because profits are tax as personal income tax.
- Sole Proprietorships registrations must be renewed annually.
- Funds raising is generally more difficult
- Must renew business registration annually
- Must ensure that CPF Medisave account is fully topped up.
- Sole proprietors do not enjoy tax exemptions and rebates available to corporations.
