Business (Sole Proprietorship)
It is easier and cheaper to set up a business. The fees to register a business from ACRA is $65 in total – $15 for name application and $50 for business registration.
Company (Private Limited)
Compared to registering a business, setting up a company requires more time and may be complicated for some. Usually, a professional firm will be able to assist you in the incorporation of a company in Singapore. The registration fee to set up a private limited company will be $315 in total. $15 for name application and $300 for incorporation. You may also purchase the Bizfile at a discounted price of $3.30 during incorporation. The usual price for company Bizfile is $5.50.
A Sole Proprietorship is set up by an individual/owner, which enables the person to perform business transactions. If there are more partners joining the entity, it will become a partnership. However, as a partnership, the liability is distributed equally among the partners. For profit sharing purposes, it is recommended to draft a partnership contract, clearly stating on the profit each will receive in terms of percentage in order to prevent disputes in the future. Similarly, for both Sole proprietorship and partnership, the business has unlimited liability. This means that the owners can be sued in their personal capacity by creditors.
A Private Limited Company can be set up with various structures, such as limited by shares, limited by guarantee, and it can also be set up as a non-profit organisation. A company will have to declare its Share Capital and Paid up Capital, thus the company limits the liability only up to the company’s Paid up capital and not to the shareholders or directors. This provide “protection” to the stakeholder liability when being sued. However in some cases, the corporate veil may be lifted if there is any criminal act involved in the company.
After setting up a sole proprietorship, there are actually very minimal compliance to fulfill. Basically, a Sole Proprietor will have to maintain proper records and file a 4-line statement to IRAS under the Individual tax during personal tax filing period. A business is not required to prepare or submit audited accounts to ACRA on a yearly basis. However, a business is required to renew its registration yearly and the business owner needs to fulfill the minimum amount to contribute into the Medisave.
A company will need to file an Annual Return and Annual General Meeting to ACRA after its financial year end. Besides that, IRAS requires the company to file its Estimated Chargeable Income and the Tax Form C/Cs. A Company is required to submit the audited report based on ACRA’s requirements. The company may also consider outsourcing the accounting functions to an accounting firm in Singapore to lessen their compliance workload.
A business is easier to close or terminate the business registration by not renewing or giving notice to ACRA.
A Company that applies to strike off will be subjected to various checks before ACRA grants the approval for striking off. For example, the company must not have any outstanding tax payable to IRAS and there has to be no objections to striking off the company by creditors. This process usually takes about 6 months.