Most of you would have heard of companies, and it seems like something that is unreachable by the common folks and only achievable by those who are rich or exceptionally smart and business savvy. This statement is not really true, start your business small and slowly build up your experience if you have to, it's do-able.
Lets talk about sole proprietorship.
Sole proprietorship
Pros
- this business type is the easiest and most hassle free to register, you can register for it at a small fee of around $20 at Singapore's ACRA website. And the time it takes to activate is just a short 1-2 weeks, and voila! You have a registered business and your customers will feel much more secured.
- No filing of accounts is needed.
- Free from corporate tax, and hence double taxation. Double taxation will be explained later on.
Cons
- There is UNLIMITED liability for this business model, and this means that should anything happen and you have to compensate to customers or legal authorities etc, you are liable to pay for all the expenses using the assets that is under your name, meaning your house, car, etc.
- There is limited lifespan for this business model as it difficult for one person to pass on the business to another compared to that of a registered company.
Company
Pros
- The main advantage that a company (i.e private limited) has over sole proprietorship is that of limited liability. Limited liability means that your company is registered as a separate company and hence, any compensation of any sort is only limited to using up the assets of your company and not those that is personal to you.
- Transfer of ownership is easy and hassle free, for example when someone wants to buy over your business and you find that it is wise to sell your business for a hefty sum of money.
Cons
- Double Taxation. Being a company subjects it to corporate tax, and following which is income tax. Hence, you are essentially being taxed twice.
- A certified accountant has to be hired as accounts needs to be filed and audited once a year.
Conclusion
The above descriptions are the bare minimal of the distinctive points of the two different types of business models. You should do more readings on this topic before deciding which is a better choice. For example, this webpage will be a good start, www.singaporelaw.sg/content/BA.html
In most cases, unless you come from a rich background, or is extremely business-savvy with a well established network. Chances are high that you will embark on sole proprietorship first like me before gaining the necessary specialties and money to move on to bigger entities.
