Last updated: 18 July 2026
The short answer
If you are testing an idea, carry little risk and expect modest profit, a sole proprietorship is cheaper and simpler: S$115 to register and almost no ongoing compliance. The moment real money or real risk appears, the private limited company wins. A Pte Ltd caps your personal exposure at your share capital, pays a flat 17% corporate tax against personal rates that climb to 24%, and new companies can shelter up to S$125,000 of profit a year for three years under the Start-Up Tax Exemption. Foreigners should default to the Pte Ltd from day one.
The three facts that matter
- A sole proprietorship is not a separate legal person. Business debts are your debts, and creditors can reach your personal assets. A Pte Ltd caps your loss at the capital you put in.
- Sole proprietor profits are taxed at progressive personal rates (22% above S$320,000, top rate 24%). A Pte Ltd pays 17% flat, and SUTE exempts 75% of the first S$100,000 and 50% of the next S$100,000 for the first three Years of Assessment.
- Registration: S$115 for a one-year sole proprietorship (renewable) versus S$315 once for a Pte Ltd, which then needs a local director, a company secretary within 6 months and annual returns.
What each structure actually is
A sole proprietorship has no legal existence apart from you. It is registered with ACRA under the Business Names Registration Act, profits land directly in your personal tax return, and there is no wall between the business's obligations and your savings.
A Pte Ltd is a separate legal person incorporated under the Companies Act. It can own property, sign contracts and be sued in its own name, with 1 to 50 shareholders. That single distinction, separate legal identity, drives nearly every other difference: liability, tax, credibility and fundraising.
Liability: the difference that shows up in bad years
With a sole proprietorship, a supplier you cannot pay or a client who sues can pursue your personal bank account and property. With a Pte Ltd, a shareholder ordinarily stands to lose only what they invested.
One honest caveat: banks often ask small-company directors for personal guarantees before extending credit, which pierces the shield for that specific loan. Every other creditor without a guarantee still stops at the company. A sole proprietor has no shield at all.
The tax math, worked through
Sole proprietor: profits are added to your personal income and taxed at progressive resident rates. The 22% band starts at S$320,000 of chargeable income and the top rate is 24%. No startup exemptions apply.
Pte Ltd: flat 17% corporate tax. Qualifying new companies get the Start-Up Tax Exemption for their first three consecutive Years of Assessment: 75% of the first S$100,000 of normal chargeable income exempt, 50% of the next S$100,000, a maximum of S$125,000 exempt each year. Conditions: incorporated and tax resident in Singapore, no more than 20 shareholders with at least one individual holding 10% or more; investment holding and property development companies are excluded. After the three years, the partial exemption still shelters 75% of the first S$10,000 and 50% of the next S$190,000.
On S$200,000 of profit, the difference is not subtle:
| Structure | How S$200,000 is taxed | Approx. tax |
|---|---|---|
| Sole proprietorship | Personal resident rates on S$200,000 chargeable income | ~S$21,150 |
| New Pte Ltd with SUTE | S$125,000 exempt, 17% on the remaining S$75,000 | ~S$12,750 |
Dividends carry no further tax in shareholders' hands under the one-tier system. Below roughly S$80,000 of profit the maths flips: personal rates at that level undercut the effective corporate rate, which is why the sole proprietorship remains rational for small operations. The crossover depends on your personal reliefs.
Which structure fits you?
Answer three questions for an indicative read. It is not advice, but it will frame the right conversation.
Setup and running costs
- Sole proprietorship: S$15 name application plus S$100 registration, S$115 total for one year (S$175 for three). It must be renewed, business income goes in your personal return, and self-employed persons make compulsory Medisave contributions based on net trade income.
- Pte Ltd: S$15 name application plus S$300 incorporation, S$315 once. Then the recurring obligations: at least one ordinarily resident director, a qualified company secretary within 6 months, a registered office, annual returns to ACRA and proper accounts. Most small companies escape the audit: meet 2 of 3 criteria (revenue not above S$10 million, assets not above S$10 million, not more than 50 employees) and you are audit-exempt.
Budget honestly for the Pte Ltd: secretarial and accounting support is a real annual cost. It buys the liability cap, the tax treatment and a structure investors and banks recognise.
Want the decision checked against your numbers?
Send us your expected profit and what the business does. Our Singapore team will tell you which structure fits and what it will really cost to run. One message, no charge.
Get a structure checkForeign owners: the decision makes itself
A foreigner cannot practically run a sole proprietorship from abroad: it requires a locally resident authorised representative and leaves the owner personally liable in a country they do not live in. A Pte Ltd allows 100% foreign shareholding with one locally resident director, which is the standard route for overseas founders entering Singapore. Raising money points the same way: investors need shares, and only a company can issue them.
When the sole proprietorship genuinely wins
- Side income alongside employment, or a trial run of an idea
- Low-liability services: no premises, no staff, no stock, no credit
- Profit comfortably below the S$80,000 to S$100,000 range
- You want zero structural admin while you validate the business
There is no shame in starting simple. The mistake is staying simple after the risk profile has changed.
Converting later
Moving from sole proprietorship to Pte Ltd is routine but not free: you incorporate the company, transfer assets and contracts to it, move licences and bank accounts, and cancel the business registration. Clients sign fresh agreements with the new entity. It is a few weeks of admin best done at a natural break such as a financial year end, and it is the standard growth path for businesses that started small. Our incorporation team in Singapore runs the whole sequence, with accounting and tax picking up from day one. And if turnover is heading past S$1 million, note that GST registration applies to both structures equally.
Incorporation, handled end to end
Name to bank account, secretary to first filing, from our Singapore office, with Dubai and India covered by the same team.
Talk to our Singapore teamFrequently asked questions
Is a sole proprietorship cheaper than a Pte Ltd in Singapore?
To set up and run, yes: S$115 a year versus S$315 once plus ongoing secretarial, accounting and filing obligations. Above roughly S$100,000 of annual profit, the Pte Ltd's tax treatment usually more than repays its running costs.
How is a sole proprietorship taxed?
Profits are taxed as the owner's personal income at progressive resident rates, reaching 22% above S$320,000 of chargeable income and 24% at the top. No startup exemptions apply.
How much tax does a new Pte Ltd pay?
17% flat, reduced by the Start-Up Tax Exemption in the first three Years of Assessment: 75% of the first S$100,000 exempt and 50% of the next S$100,000, up to S$125,000 exempt per year for qualifying companies.
Can a foreigner own a Singapore Pte Ltd?
Yes, 100% foreign shareholding is permitted, provided the company has at least one ordinarily resident local director. A sole proprietorship is not a practical route for foreigners.
Does a small Pte Ltd need an audit?
Usually not. Companies meeting 2 of 3 criteria (revenue not more than S$10 million, assets not more than S$10 million, 50 or fewer employees) qualify for audit exemption as small companies.
Can I convert my sole proprietorship into a Pte Ltd?
Yes. You incorporate a new company, transfer assets, licences, contracts and banking to it, and cancel the sole proprietorship registration. It is a routine process, typically a few weeks of admin.
Sources
- ACRA: sole proprietorship and partnership fees. acra.gov.sg
- ACRA: company-related fees. acra.gov.sg
- IRAS: corporate income tax rate, rebates and exemption schemes (SUTE and partial exemption). iras.gov.sg
- IRAS: individual income tax rates (resident rate table). iras.gov.sg