Legal Status of a sole-proprietorship
A sole-proprietorship does not constitute a separate legal entity and therefore is not distinct from the owner/proprietor. The owner is personally liable for all liabilities incurred during the course of business and must sue or be sued in their own own name.
Taxation of a sole-proprietorship
A sole-proprietorship, though a tax resident, is not considered as a company entity; therefore its profit is taxed at the owner’s personal income tax rates. Singapore’s personal income tax rates for resident tax payers are progressive from 0% to a maximum of 22% % for income in excess of SGD320,000. The maximum corporate tax rate in Singapore is 17%.
Generally sole-proprietors registered with the Accounting and Corporate Regulatory Authority of Singapore (ACRA) are self-employed. A person is considered self-employed when they earn a living by carrying a trade, business, profession or vocation. All self-employed persons must report the income earned from their business operations as business income, not salary, which forms part of their total personal income.
Formation of a sole-proprietorship
An individual proprietor must be at least 18 years old and either a citizen or Permanent Resident of Singapore or a Singapore EntrePass holder. Where an individual proprietor is a foreigner or does not reside in Singapore, they must appoint at least one authorised representative who is at least 18 years of age, of full legal capacity and ordinarily resident in Singapore.
Registration requirements for a sole-proprietorship
A sole-proprietorship must be registered with ACRA. Before a self-employed person can register a sole-proprietorship, become the owner of an existing business name or renew a business registration, they must top up their Medisave account with the Central Provident Fund (CPF) Board.
The registration process in Singapore comprises name reservation and registration of the entity.
The following information and/or documentation will be required: