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In Singapore, if you want to carry out any business activity, then you need to register it as a business entity. Singaporean business owners can register sole proprietorships, partnerships, or limited liability partnerships in the country. Meanwhile, foreign business owners can register private limited companies or public limited companies in Singapore.
Of these types of businesses, a sole proprietorship is the most simplified structure. A sole proprietorship also has a more affordable registration and maintenance fees. Thus, foreign business owners with limited budget usually ask if they can register sole proprietorships, instead of companies, in Singapore. Let’s find out!
A sole proprietorship is a single-person and small-sized business. However, a sole proprietorship does not have an independent legal entity like what a company has. In this business structure, the proprietor is the decisive body and accountable for all the assets and liabilities owned by the business. A sole proprietorship cannot also own a property.
According to ACRA, a proprietor has unlimited liability, which means that he or she is personally liable for the debts and losses of the sole proprietorship. A sole proprietorship can also sue or be sued in the proprietor’s name.
To be able to set up a sole proprietorship, you must be:
Technically, a foreigner can register his or her business as a sole proprietorship provided that he or she will appoint one Singapore citizen or permanent resident as an authorized representative. The name of this person must appear on ACRA records.
Since a sole proprietorship is not an independent legal entity, the proprietor is fully responsible for the liabilities of his or her business. If the proprietor is in a foreign country, the authorized representative will be held responsible for these liabilities. Also, in case the sole proprietor becomes uncontactable because he or she is in a foreign country, the liabilities will be settled through the personal assets of the authorized representative.
Since a company is an independent legal entity, the company and the nominee director are regarded as two different entities. The nominee director will not be accountable for the liabilities of the company, even if all of the company shareholders are in a different country.
In principle, the role of the authorized representative in a sole proprietorship is much riskier compared to that of the company nominee director.
Even if the law allows foreigners to register their sole proprietorships in Singapore by appointing authorized representatives, professional firms in the country will not provide them with persons to be appointed with such role the way they provide nominee directors. Nevertheless, if you have a relative or friend who is willing to take the risk of being an authorized representative, then your sole proprietorship can be established. Otherwise, your best option is to register a private limited company.
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