Understanding Sole Proprietorship
A sole proprietorship is a business owned and run by one individual. The owner receives all profits but is also responsible for the business’s debts and losses. It is the simplest business structure with minimal government regulation, commonly chosen by small business owners.
Setting Up a Sole Proprietorship
To establish a sole proprietorship, the owner can use their personal name or a "Doing Business As" (DBA) name. While no paperwork is required for a personal name, a DBA form may be necessary. This business structure is favored by independent contractors and small business owners due to its simplicity and affordability.
Legal and Tax Considerations for Sole Proprietors
Income and expenses for a sole proprietor are reported on a Schedule C tax form, with profits subject to income and self-employment taxes. The owner can deduct typical business expenses, but personal assets are at risk in case of legal action. Some sole proprietors may choose to convert to LLCs or corporations for liability protection and tax benefits, though many retain their sole proprietor status.
To set up a sole proprietorship in Singapore, one must be at least 18 years old and a citizen, permanent resident, or EntrePass holder. Expatriates and employment pass holders face certain limitations.