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Start a Singapore LLC or a Sole Proprietorship?

Updated on Saturday 17th February 2018

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Start-a-Singapore-LLC-or-a-sole-proprietorshipA foreign enterpriser who wants to open a company in Singapore must make several choices, one of the most important being the structure of the business. The Commercial Law provides for several types of business forms available for registration, among the most popular ones being the sole proprietorship for a small business, and the limited liability company (LLC) for a small and medium-sized entity.

The decision on whether to open a sole trader to a limited liability company in Singapore must be taken by the investors once they study the options thoroughly. Our Singapore company formation experts can help you choose between these two types of structures.

You can find out from the video below how to choose between a Singapore LLC and a sole trader:

The sole proprietorship in Singapore

The Singapore sole trader is the simplest way of starting a business in the city-state and is destined for single business owners. The particularity of this structure is that it is not a legal entity, therefore the owner will be personally liable for the debts and obligations of the business.

With respect to the registration of a sole trader, it must take place with the Accounting and Corporate Regulatory Authority of Singapore (ACRA).

The sole proprietorship is suitable for professionals, such as doctors, accountants, architects and so on.

The limited liability company in Singapore

Compared to the sole trader, the Singapore limited liability company offers a great advantage: the limited responsibility of the participants to the business.

The registration process of an LLC implies drafting more documents for the incorporation, however the procedure is as simple as in the case of the sole proprietorship and is completed with ACRA.

The LLC is appropriate for almost any type of undertaking, among which retail shops, fintech companies and even online businesses.

Sole trader vs. limited liability company in Singapore

Choosing between a sole proprietorship and an LLC is quite complicated, so here are a few pointers when having to choose between these two types of structures:

  • -          the size of the business: the sole trader is suitable for small businesses only, while the LLC is more versatile;
  • -          the risks of the business: it is riskier and more difficult to raise money for a sole trader than for an LLC;
  • -          taxation: LLCs benefit from many tax incentives compared to the sole trader which will pay the personal income tax.

For those who choose to open a sole trader in Singapore, they must know that they can later change it into a limited liability company.

Please contact our Singapore company formation agents if you want to open any of the two types of business forms.

 

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