Essential Checklist for Setting Up a Sole Proprietorship in Singapore

A sole proprietorship is one of the simplest forms of business structure in Singapore, offering a straightforward way for individuals to start and operate a business. As an unincorporated business owned by a single individual, a sole proprietorship is easy to set up and offers full control to the owner. However, it also comes with personal liability for all business debts and obligations. If you’re considering setting up a sole proprietorship in Singapore, this guide provides a step-by-step checklist to help you get started.

What is a Sole Proprietorship?

A sole proprietorship is a business structure owned and operated by one individual with no distinction between the owner and the business. This means that the owner is personally responsible for all liabilities and obligations of the business. Although it’s simple to set up, a sole proprietorship lacks the legal protection of a separate entity, unlike private limited companies.

Advantages and Disadvantages of a Sole Proprietorship

Advantages

• Full Control: Owners make all business decisions independently.
• Simple Setup and Low Cost: Fewer regulations and no separate incorporation process make it an inexpensive setup.
• Direct Taxation: Income is taxed at personal income tax rates rather than corporate tax rates, which may benefit small-scale businesses.

Disadvantages

• Unlimited Liability: The owner is personally liable for all debts and obligations, risking personal assets.
• Limited Capital: Raising funds may be challenging as investors may be hesitant to invest in a sole proprietorship.
• No Continuity: The business structure lacks perpetual succession; if the owner leaves, the business dissolves.

Also Read: Understanding Duties of Resident Directors in Singapore

Key Steps to Set Up a Sole Proprietorship in Singapore

Step 1: Business Name Registration

The first step in establishing your sole proprietorship is to choose and register a business name with the Accounting and Corporate Regulatory Authority (ACRA).

• Check Name Availability: Ensure that your chosen business name is unique and not already in use.
• Choose a Suitable Name: The name should align with your business’s nature and purpose, and must not be offensive or restricted by ACRA.
• Submit Registration Form: Once you’ve selected an available name, complete the Business Name Registration form on ACRA’s BizFile+ portal.

Step 2: Obtain a Business License (If Required)

Some business activities in Singapore require specific licenses before operation. Depending on your business’s nature, this step may or may not apply.

• Identify Necessary Licenses: Review your business activities to determine if they require licensing.
• Apply for Relevant Licenses: Some common licenses include the Food and Drug Administration (FDA) license, Workplace Safety and Health (WSH) license, and various trade-specific permits. Application processes will vary by license type.

Also Read: Capital Requirement for Money Changer License in Singapore

Step 3: Register for GST (If Applicable)

Goods and Services Tax (GST) is mandatory for businesses with annual taxable turnover exceeding SGD 1 million.

• Understand the GST Threshold: If your business’s revenue meets or exceeds this threshold, you’re required to register for GST.
• Register with IRAS: Registration is done with the Inland Revenue Authority of Singapore (IRAS). You will receive a Unique Entity Number (UEN), which will be your business’s unique tax identifier.

Step 4: Open a Business Bank Account

Opening a separate bank account for your business helps streamline accounting and financial management.

• Choose a Bank: Select a bank that offers suitable business account options based on your needs.
• Prepare Necessary Documents: Commonly required documents include your NRIC or passport, business registration certificate, and lease agreements (if applicable).
• Submit the Documents: Once you’ve prepared the documents, submit them to your chosen bank to set up the account.

Step 5: Comply with Employment Laws

If you plan to hire employees, you must comply with Singapore’s employment regulations.

• Understand the Employment Act: Familiarize yourself with the minimum wage, overtime pay, and leave entitlements to ensure compliance.
• Central Provident Fund (CPF): If hiring local employees, CPF contributions are mandatory, along with other statutory deductions as applicable.

Also Read: Checklist for Company Limited by Guarantee Formation in Singapore

Step 6: Adhere to Tax Regulations

Tax compliance is crucial for any business, including sole proprietorships.

• File Income Tax Returns: File your income tax returns with IRAS annually, reporting income from your business as part of your personal income tax.
• Understand Tax Implications: It’s important to know the tax obligations related to your business activities, including any deductible expenses.
• Seek Professional Advice: Consulting with a tax advisor can help optimize tax liabilities and ensure accurate filing.

Conclusion

Setting up a sole proprietorship in Singapore is relatively simple and cost-effective, making it ideal for individuals looking to start a small business. By following the steps in this checklist—registering your business name, obtaining licenses, opening a business account, and ensuring compliance with tax and employment laws—you can get your business up and running efficiently.