The Singapore sole proprietorship is the most flexible and simplest business setup. This setup is ideal to micro and small business operations, there is only one person who owns the entire business, including its assets, financial liabilities, debts, and duties.
The most notable benefit of the sole proprietorship is that the owner enjoys unlimited control and authority when it comes to handling his business. With this, making hasty decisions is possible since there is no need for the approval of other co-owners.
However, the advantage of having a full control comes with a steep price as the sole proprietor is personally liable for all the claims, lawsuits, debts, and financial losses of his business which is viewed as his legal extension.
These are the main characteristics of the sole proprietorship:
The sole proprietor has no limited liability, as a result, he is directly liable for the lawsuits, claims, debts, and financial losses related to his business.
The business is not treated as a separate entity from its owner.
The business is not treated as a “legal entity” per se since it cannot purchase supplies, own properties, and file a lawsuit under its name.
The business is not a separate legal entity from the sole proprietor.
Just like any business structures, the sole proprietorship has its pros and cons which must be greatly considered by entrepreneurs:
Its Primary Advantages
Because there is only one owner, it is very easy for him to sell and transfer his business anytime he wants to because there is no need to seek the approval of other co-owners.
With this, the business is usually easy to liquidate compared to other setup such as partnership and corporation.
Also, being the sole proprietor means that a person can enjoy all the profits and earnings of his business without having to divide these to other people.
Another advantage of this setup is that the sole proprietor is not obligated to perform complicated compliance matters and procedures. In fact, he is not even required to submit his annual returns since he is only taxed at a personal income rate.
Being the only owner also comes with several disadvantages and one of these is the unlimited liability of the sole proprietor, which means that his personal assets can be used to pay off for the business-related debts and losses.
It would also be more challenging to raise capital and operate the business because there is only one owner.