Can a Foreigner Set Up a Sole Proprietorship in Singapore?

Singapore is one of the most business-friendly countries in the world, offering a transparent legal system, low corporate taxes, and simple company registration procedures. However, for foreigners, the rules differ slightly depending on the type of business entity you want to set up. One of the simplest forms of business ownership in Singapore is a sole proprietorship, but can a foreigner actually set one up?

This article explores the key considerations, eligibility criteria, and steps for foreigners who wish to start a sole proprietorship in Singapore.

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Understanding What a Sole Proprietorship Is

A sole proprietorship is the simplest and most straightforward business structure available in Singapore. It is owned and controlled by a single individual, who assumes full responsibility for the business’s operations, profits, and liabilities.

Unlike a company (such as a private limited company), a sole proprietorship is not a separate legal entity. This means the owner and the business are legally the same person — all income earned is considered personal income, and all debts or legal issues are personally borne by the owner.

Key Features of a Sole Proprietorship

• Single Owner: Only one person can own the business.

• Full Control: The owner has complete control over all business decisions.

• Unlimited Liability: The owner is personally liable for all business debts.

• Taxation: The business income is taxed at the owner’s personal income tax rate.

• Registration: It must be registered with the Accounting and Corporate Regulatory Authority (ACRA) under the Business Names Registration Act.

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Can a Foreigner Register a Sole Proprietorship in Singapore?

Yes, a foreigner can register a sole proprietorship in Singapore, but there are important conditions and practical limitations. Unlike Singapore citizens and permanent residents, foreigners cannot simply register and operate a sole proprietorship without fulfilling certain residency and management requirements.

1. Residency Requirement

A sole proprietor must be a Singapore citizen, Singapore Permanent Resident (PR), or an EntrePass holder (a specific work pass issued to foreign entrepreneurs).

If you are a foreigner who does not reside in Singapore, you cannot directly register a sole proprietorship in your own name unless you appoint a local authorized representative who is a Singapore resident (citizen or PR).

In short:

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Appointing a Local Authorized Representative

If you are a foreigner residing overseas, you must appoint a local authorized representative to manage your business on your behalf.

The representative must be:

• At least 18 years old

• Ordinarily resident in Singapore (Citizen, PR, or EntrePass holder)

• Capable of accepting legal responsibility for the business

The authorized representative acts as your local point of contact for ACRA and other government authorities. You can still own the business, but operationally, your local representative will handle compliance and administrative matters in Singapore.

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Alternatives to Sole Proprietorship for Foreigners

While it is technically possible for foreigners to own a sole proprietorship in Singapore, it is not always the most practical option due to the residency and liability requirements. In most cases, foreigners choose to register a private limited company (Pte. Ltd.) instead.

Here’s why:

1. Separate Legal Entity

A private limited company is a distinct legal entity. This means the shareholders are not personally liable for business debts beyond their share capital contribution.

2. Easier to Attract Investors

A company structure is more attractive to investors and lenders than a sole proprietorship, as it offers limited liability and clearer corporate governance.

3. Flexibility in Ownership

Foreigners can own 100% of the shares in a Singapore private limited company, making it a preferred structure for overseas entrepreneurs.

4. Tax Benefits

Corporate tax rates in Singapore are capped at 17%, and there are partial tax exemptions for new startups, making it more tax-efficient than paying personal income tax rates on sole proprietorship income.

5. Perpetual Succession

Unlike a sole proprietorship, which ceases to exist when the owner dies or deregisters, a private limited company can continue indefinitely.

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Steps to Register a Sole Proprietorship as a Foreigner

If you decide that a sole proprietorship is still the best fit for your needs, here’s how to proceed:

Step 1: Appoint a Local Authorized Representative

Since you are a foreigner, your first step is to appoint a local representative who meets the eligibility requirements. This person will handle the registration process with ACRA.

Step 2: Choose a Business Name

You must select a business name and submit it for approval via ACRA’s BizFile+ portal. The name must not be identical to an existing business, infringe trademarks, or be deemed inappropriate.

Step 3: Prepare the Required Documents

You’ll need the following:

• Proposed business name

• Description of business activities (using Singapore Standard Industrial Classification code)

• Local address for the business (cannot be a P.O. box)

• Identification documents of the business owner and local representative

• A declaration of compliance

Step 4: Register with ACRA

Once your name is approved, you can proceed to register your business. The process is conducted entirely online and typically takes one to two working days if all documents are in order.

Step 5: Obtain Work Pass (If You Plan to Relocate to Singapore)

If you plan to manage the business in person, you must apply for an EntrePass through the Ministry of Manpower (MOM). This allows you to stay in Singapore legally while running your sole proprietorship.

Step 6: Open a Business Bank Account

Once registered, you can open a corporate bank account under your business name to separate your personal and business transactions.

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Ongoing Compliance Requirements

Running a sole proprietorship in Singapore involves several ongoing obligations. Failure to comply may result in penalties or deregistration by ACRA.

1. Annual Renewal

Your sole proprietorship registration must be renewed annually. ACRA will send you a reminder one month before the expiration date.

2. Updating Changes

Any changes to your business address, ownership, or local representative must be updated with ACRA within 14 days.

3. Accounting and Tax Filing

Even though you are not required to file separate financial statements, you must declare your business income in your personal income tax return (Form B or B1) with the Inland Revenue Authority of Singapore (IRAS).

4. Business Licensing

Certain industries require additional licenses — for example, food and beverage, employment agency, or finance-related services. You must obtain these before commencing operations.

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Advantages of Setting Up a Sole Proprietorship

• Simple and Low-Cost Setup: The registration process is fast, with minimal paperwork and cost (as low as SGD 115).

• Full Control: You make all business decisions without needing board approval.

• Tax Reporting Simplicity: Business income is declared as personal income.

• Quick Deregistration: If you decide to cease operations, deregistration is straightforward.

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Disadvantages for Foreigners

• Unlimited Liability: You are personally responsible for all debts and legal claims.

• Residency Restriction: Non-residents must appoint a local representative.

• Limited Access to Funding: Investors prefer incorporated companies.

• Lower Business Credibility: Many clients and partners prefer dealing with incorporated entities.

• Non-Perpetual: The business ceases if you die or deregister.

For these reasons, most foreign entrepreneurs choose to incorporate a private limited company instead of registering a sole proprietorship.

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Cost Comparison: Sole Proprietorship vs. Private Limited Company

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Common Mistakes Foreigners Make

1. Choosing the Wrong Structure: Some foreigners start with a sole proprietorship without realizing it limits liability protection and business growth.

2. Not Appointing a Qualified Local Representative: Failure to appoint a suitable Singapore resident can result in registration rejection.

3. Ignoring Work Pass Requirements: You cannot manage your business in Singapore without a valid work visa such as the EntrePass.

4. Not Meeting Licensing Requirements: Some industries require sector-specific licenses that foreigners overlook.

5. Mixing Personal and Business Finances: Without a business bank account, tracking profits and tax obligations can become problematic.

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Professional Help for Foreigners

Foreigners are strongly encouraged to engage a corporate service provider or business registration consultant in Singapore to assist with the process. These professionals can help with:

• Registering your business with ACRA

• Acting as your local authorized representative

• Assisting with EntrePass applications

• Handling tax and accounting compliance

• Advising if a private limited company might be more suitable

Engaging a professional firm ensures compliance with all local laws and helps avoid costly mistakes during registration.

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Conclusion

In summary, foreigners can set up a sole proprietorship in Singapore, but there are significant limitations. While it is possible with a local representative or EntrePass, the lack of limited liability and the residency requirements make it less attractive compared to incorporating a private limited company.

If your goal is to build a scalable and credible business presence in Singapore, a private limited company is the preferred structure. However, if you’re testing the market or running a small consultancy, a sole proprietorship might suffice initially — as long as you understand the responsibilities and legal implications involved.