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In our numerous interactions with entrepreneurs over the years, one particular question has stood out - which is better between a sole proprietorship and a private limited company?
Although Singapore is flexible enough to accommodate a broad range of corporate structures, it just so happens that business owners overwhelmingly settle for either a sole proprietorship or a Pte Ltd. So much so that the Accounting and Corporate Regulatory Authority (ACRA) is now registering about 140,000 sole proprietorships and 360,000 companies per month.
Their incorporation procedures, however, are very different, and the same applies to the subsequent compliance processes. What you end up choosing here will have a huge impact on not only your administration framework, but also your taxes, statutory processes, and business liabilities.
What is a Private Limited Company?
A private limited company (or Pte Ltd) is a limited liability corporation where ownership is represented by privately held shares. Shareholders are not personally liable for the company’s debts. To register in Singapore, Pte Ltd requires at least one shareholder, resident director, a corporate secretary, a local office, and at least S$1 in capital. A Pte Ltd must also pay corporate tax at a rate of up to 17%.
Read More: Setting Up a Private Limited Company in Singapore
What is a Sole Proprietorship?
On the other hand, a sole proprietorship is owned and managed by a single individual, and the business is legally the same as the owner, including liabilities and assets. For taxes, sole proprietorship profits are taxed as personal income –which may come at higher rates.
Read More: Advantages and Disadvantages of a Sole Proprietorship
Sole Proprietorship vs. Pte Ltd
Which Favors a Foreigner In Singapore?
By now, you’re probably aware that Singapore is open to hosting foreign-owned corporations. But, one thing you should know is that as a foreigner, your incorporation options are pretty limited. Foreigners can’t set up a sole proprietorship in Singapore.
However, ACRA allows you to fully register a Pte Ltd company as a shareholder and director. The only requirement is that your application should include a local resident director. Additionally, Pte Ltd companies can also enjoy more benefits such as tax exemption, government grants, and greater access to external funding and government support schemes.
Where To Start
After choosing between a sole proprietorship and a private limited company (Pte Ltd), you might want to leave the incorporation intricacies to the professionals. WealthBridge can assist you with registration, accounting, payroll management, and tax filing. Contact us today for a free consultation.