Starting businesses has a management aspect and a legal one too. For the most part,…
Company registration in Singapore encompasses a few steps- one of these steps is to decide the right business structure. It is a critical decision since this choice can impact your tax liability, compliance matters and paperwork loads. So, make sure to pick the best entity for your new venture. Many new entrepreneurs opt to register their business as a sole proprietorship registration in Singapore. It is the most simple and basic form of business registration in the city-state.
In Singapore, out of six important business structures, the private limited company of LLC (Limited Liability Company) and sole-proprietorship are the two popular choices for the small and medium enterprises. Both the structures have their own unique advantages. This article will provide which types of business should consider registering sole- proprietorship in Singapore.
What is Sole-Proprietorship?
A business entity owned and operated by one person or one company is called as sole-proprietorship. There is no concept of partnership in this sort of entity. It does not have any separate legal identity. The owner has the full control over all elements of the company and will be held responsible for all debts, losses, and liabilities incurred by the entity.
A sole proprietorship in Singapore is the easiest form of business structure for small and medium entrepreneurs. All you need to do are 1) business name approval and 2) registration of the entity with government authority. Reiterating, managing this simple business structure is easy, and a very minimal business administration is required. The compliance obligations are also less. Many independent professionals such as freelancer, consultants, and contractors register their businesses in the form of sole proprietorship for ease and convenience.
Take a Glance into the Advantages & Disadvantages of Sole Proprietorship
1. Easy Set-up and Wind Up (Only two simple administrative steps involved in registration)
2. Cost of registration is low (when compare with company registration Singapore)
3. Tax preparation is simple and quick (tax liability comes under personal income tax).
4. Autonomy of profit distribution and business decision.
5. Legal compliance is very minimal (in comparison to company)
There are some limitations of this popular choice of business structures which can not be overlooked.
Unlimited liability of the owner: The owner is responsible for the debts, losses incurred by the company. The personal assets of the sole proprietors are not protected.
Raising capital is not as easy as it is for a private limited company. The process is quite hard.
The securing of a loan can be challenging and may depend on the credibility of a sole proprietor.
Despite these loopholes, this form of business structure has been accepted by the start-up businesses for its own distinct set of features.
Which sort of Businesses are best suitable for Sole Proprietorship?
There are certain categories of businesses which are best suited for registering as sole-proprietorship in Singapore. The characteristics of those businesses are elaborated here-under.
– Business with Limited Budget: Small and medium businesses that operate on the shoestring budget without any chance of incurring debt is best suited for a sole proprietorship. A business with less legal trouble is less likely in need of protection from legal liability.
– A one-man show in Management: Sole proprietorship is an ideal choice for entrepreneurs who want to retain fuller control of their business’ management in his hand.
– Individual Ownership: This form of entity is well suited for business owners who are not interested in sharing their business with any partner. Precisely, they are confident that they are not going to bring a partner on board in the future.
– Small Size Business: No need to invest your valuable time and money on administrative tasks of the government authority, if you are planning to venture out a small-size business. Register it as sole-proprietorship. It involves the least amount of statutory obligations, allowing a start-up to focus on growth and productivity. It is the best way to avoid the myriad of legal compliance meant for companies in Singapore.
If your business type and interest fall under any of the factors mentioned above, you may consider registering your venture as a sole-proprietorship. As the business scales and matures, you may consider converting it to a private limited company by opting the process of company registration Singapore. A private limited has umpteen number of advantages for the growing business. There are many good advisers and mentors available in Singapore who can provide advice and guidance on converting the business.