Sole proprietorship or private limited company: which suits a new business in Singapore?
According to ACRA, a sole proprietorship is the simplest business form: you are the only owner, the business is not legally separate from you, and you are personally liable for all its debts and losses. A company is a separate legal entity, so its shareholders are not personally responsible for its debts, although ACRA notes that a company has the most rules to follow and more yearly paperwork. ACRA charges S$115 to register a sole proprietorship for one year, with renewal every one or three years, and S$315 to incorporate a company. ACRA says a sole proprietor's profits are taxed at personal income tax rates, which IRAS sets on a progressive scale up to 24% for tax residents, while IRAS taxes companies at a flat 17% before any exemption or rebate. ACRA also says that a foreigner who lives overseas, or who has no Singpass, must have a corporate service provider register the business, and that every business needs at least one local resident in a required role.
Liability and legal standing
ACRA's comparison of business structures says a sole proprietorship is not a separate legal entity from its owner. You sue, are sued and own property in your own name. Your liability is unlimited, which ACRA explains as being personally responsible for all business debts and losses.
A company, on the same ACRA page, is a separate legal entity. It can sue, be sued and own property in its own name, and its shareholders have limited liability. A company must have one or more shareholders and one or more directors. An exempt private company has 20 shareholders or fewer, and a private company 50 or fewer.
Who may register
To register a sole proprietorship as a local, ACRA requires you to be aged 18 or above and a Singapore citizen, permanent resident or eligible FIN holder. If you hold a FIN, you must first confirm with your pass issuer, such as MOM or ICA, that you can register a business. You must not be an undischarged bankrupt, unless approved. If you are self-employed, your MediSave contributions must be up to date.
ACRA adds that a foreigner who lives overseas must have a corporate service provider file for them and must appoint at least one authorised representative who meets the local residency requirements. Anyone who plans to relocate here and run the business must get MOM's approval.
For a company, ACRA's guidance on directors and other key officers lists these requirements for directors: being ordinarily resident, aged 18 or older, and a citizen, permanent resident or someone who meets local residency rules. The company must have a company secretary no later than six months after registration. The secretary must be an individual, not a company, must meet the same residency test, and cannot be the company's only director.
ACRA says every business must have at least one local resident in Singapore. It counts citizens, permanent residents and valid holders of an Employment Pass, Personalised Employment Pass or ONE Pass. If you hold an Employment Pass, you need MOM's Letter of Consent before registering a business or accepting a role.
Fees, renewal and yearly duties
ACRA lists the set-up fee for a sole proprietorship as S$115 for one year: S$15 for the name application and S$100 for registration. Three years cost S$175, an option open only if you meet conditions set by the CPF Board.
You renew every one or three years, no earlier than 60 days before expiry. Renewal costs S$30 for one year or S$90 for three, and the three-year option again depends on the CPF Board's MediSave conditions. ACRA says running the business after the registration expires is an offence. ACRA also cannot process a renewal while MediSave payable is outstanding and not on a monthly instalment plan.
A company costs S$315 to set up, according to ACRA: S$15 for the name application and S$300 for incorporation. After that, ACRA's post-registration checklist lists the company's duties. It must appoint a company secretary within six months and an auditor within three months, unless exempt. It must keep company registers from the incorporation date, unless exempt, hold annual general meetings and file annual returns.
How profits are taxed
ACRA's comparison says a sole proprietor's profits are taxed at your personal income tax rates. IRAS's rates for tax residents from the Year of Assessment 2024 are progressive. The first S$20,000 of chargeable income is taxed at 0%, and the current highest rate is 24%.
IRAS taxes the chargeable income of every company, local or foreign, at a single rate of 17%. IRAS also has a tax exemption scheme for new start-up companies. At the rates for YA 2020 onwards, a qualifying company gets a 75% exemption on the first S$100,000 of normal chargeable income and a further 50% on the next S$100,000. This applies for its first 3 consecutive Years of Assessment; from the fourth, the partial tax exemption applies instead.
Either form must register for GST if its taxable turnover in a calendar year exceeds S$1 million, or if it expects to pass S$1 million in the next 12 months, ACRA's checklists say. For a sole proprietor, the turnover covers all your sole proprietorships and your income from trade, work and other jobs. The details are in when a business must register for GST.
Closing down
ACRA says you close a sole proprietorship by formally ceasing operations. ACRA may also cancel the registration if it is not renewed or the business is no longer running. A company must be formally wound up or struck off the register, which takes longer; see how a Singapore company is closed.
Where outside help comes in
ACRA's pages show that a corporate service provider can register a business or renew a registration for you. If you are a foreigner without Singpass, you must register through one. The rules above still apply, whoever does the filing. Firms of this kind are ranked in this site's list for the field.