Business

Sole Proprietorship vs Pte Ltd: Which is the Best Choice for Singapore Businesses?

Sanjeed V K

07.06.25

Read time 6 minutes

Before you start to work in Singapore, you’ll want to register your business to comply with all legal and tax requirements which may apply. One common debate is whether to choose to register as a Sole Proprietorship vs. Private Limited Company (Pte Ltd). Both are solid choices, but as entity types they work quite differently. This is likely to dictate which is the right entity type for you.

This guide walks through the differences of Sole Proprietorship vs Pte Ltd to help you explore your options. While you’re thinking about the best way to set up your new Singapore business, why not also check out the account and card services from Wise Business, to hold and exchange 40+ currencies, and get a Wise debit card to spend in 150+ countries seamlessly, with the mid-market rate and low fees. Use Wise to manage supplier payments or to pay contractors with low fees and receive payments from customers overseas like a local.

Table of contents
Differences between Sole Proprietorship vs. Private Limited Company (Pte Ltd) What is a Sole Proprietorship? What is a Private Limited Company (Pte Ltd)? Sole Proprietorship vs Pte Ltd: Advantages and disadvantages Why choosing the right business structure matters How to convert Sole Proprietorship to Pte Ltd Tax liabilities of Sole Proprietorship and Pte Ltd

Differences between Sole Proprietorship vs. Private Limited Company (Pte Ltd)

In this guide we’ll examine the differences between a Sole Proprietorship vs. Private Limited Company (Pte Ltd), covering the legal implications, tax and why the right choice matters to your business.

Let’s start off with a look at a head to head comparison of a Sole Proprietorship vs. Private Limited Company (Pte Ltd) across key factors which will influence your decision about which is best. We’ll dive into the details as we move through this guide.

Feature¹	Sole Proprietorship	Private Limited Company (Pte Ltd)
Legal Structure	Not a separate legal entity to the individual who owns it	A separate legal entity from its members and directors
Ownership	1 person only	50 members or fewer for a standard Private Company
Liability	Owner has unlimited liability	Members have limited liability
Capital Raising	Typically capital comes from the owner, or from loans secured against the owner’s assets	Capital can be generated through sale of shares, banks may also offer loans secured against the company assets
Continuity	Exists until the owner dies or decides to stop trading	Exists until wound up or struck off
Taxation	Uses personal income tax rates	Uses corporate tax rates
Compliance Requirements	Registration must be renewed annually or every 3 years	Annual returns must be filed
Public Perception	May appear more casual or specialist	May be perceived as more professional or established
Transfer of Ownership	Cannot transfer ownership	Ownership can be transferred by transferring shares²

*Details correct at time of research, 29th April 2025

What is a Sole Proprietorship?

A Sole Proprietorship is defined by ACRA as a business owned by one person. It’s the most simple, cheap to set up, and easy to run from a compliance perspective of all Singapore business entity types.

From a legal perspective, with a sole proprietorship your personal and business finances are not separate. This means that you take responsibility for the debts or liabilities of your business personally. For example, if you take a bank loan for your business, the chances are that you’ll need to secure it against your own assets or savings, and you’ll then be personally liable to repay.

📝 As a sole proprietor you pay taxes at personal income tax levels.

➡️Check out our handy resource on Sole Proprietor Taxes in Singapore

What is a Private Limited Company (Pte Ltd)?

A Private Limited Company - usually shortened to Pte Ltd - is defined by ACRA as a business form which is a legal entity separate and distinct from its shareholders and directors.

A Private Limited Company must have at least one registered director and one shareholder, and can have up to 50 members in total. Members are protected from personal liability in this structure, and you can also choose to raise funds by selling shares - but the trade off is that this entity type has a higher fee to register, and more complex compliance requirements compared to a Sole Proprietorship.

📝 As the owner of a registered Private Limited Company, you pay taxes at corporate tax levels.

Sole Proprietorship vs Pte Ltd: Advantages and disadvantages

Not sure which option to take? Here are a few pros and cons you might want to consider while you decide:

Sole Proprietorship	Pte Ltd
✅Cheap and easy to set up ✅Low capital investment needs ✅Relatively simple legal compliance requirements ✅Very simple registration requirements	✅Limited liability for members and directors ✅Option for 2 - 50 members in total ✅Banks are more likely to offer capital and loans ✅Perceived as professional and established
❌Personally liable for company debts ❌Harder to raise capital from external sources ❌You can’t expand without changing company structure ❌May not be perceived as professionally as a Pte Ltd	❌Relatively complicated filing and regulatory requirements ❌Higher registration fees to pay ❌More capital may be needed ❌More complex registration processes in place

Sole Proprietorship

Pte Ltd

✅Cheap and easy to set up

✅Low capital investment needs

✅Relatively simple legal compliance requirements

✅Very simple registration requirements

✅Limited liability for members and directors

✅Option for 2 - 50 members in total

✅Banks are more likely to offer capital and loans

✅Perceived as professional and established

❌Personally liable for company debts

❌Harder to raise capital from external sources

❌You can’t expand without changing company structure

❌May not be perceived as professionally as a Pte Ltd

❌Relatively complicated filing and regulatory requirements

❌Higher registration fees to pay

❌More capital may be needed

❌More complex registration processes in place

📖 Considering setting up a sole proprietorship? Check out our blog on the best business account options for sole proprietors to find the perfect fit for your financial needs.

Why choosing the right business structure matters

Choosing the right business structure is important to allow you to manage your business most effectively. While you can change the entity type you select at a later date, getting it right the first time means one less thing to worry about.

There’s no one best business entity type for every company - which suits you will depend on:

the type of work you do,
how you intend your business to grow,
and other factors.

If you’re working alone and you’re happy to take on the liability for your business debts then a sole proprietorship is the obvious choice.

It’s easy to set up and has very simple compliance requirements. You’re liable for your own taxes at personal income tax rates, and can manage your business as you choose within the ACRA rules.

If, on the other hand, you intend to work with other members and shareholders, or if you’re concerned to limit your personal liabilities, a private limited company might be a better choice. This has a higher registration fee and more complex compliance requirements, but it does allow for growth more easily, and can also give you simple access to bank loans and working capital.

📖 Check out our resource on How to choose the right business structure for your company in Singapore

How to convert Sole Proprietorship to Pte Ltd

You may need to convert your sole proprietorship to a Pte Ltd structure if you want to grow your business, or if your company needs change. This will mean closing your sole proprietorship³ and then registering your new business with ACRA⁴. While there are quite a few individual steps to this process, the entire system is set up to allow you to manage this yourself, digitally. There are also many company formation agents in Singapore who can help guide you through this process for a fee if you would prefer.

Here’s a brief outline of the steps you'll be taking:

Close your sole proprietorship using a Cessation of Business form - this is done digitally with ACRA, through Bizfile
Choose and reserve your company name through Bizfile, following the proper naming rules and requirements
Complete the business registration process within Bizfile, submitting all of the required information and documents
Make the payment for your registration through Bizfile
Receive your new Certificate of Incorporation and Business Profile by email from ACRA

The process of registering your new company on Bizfile is straightforward, but you do need to have a suite of information and documents prepared in advance to manage the process hassle free.

Your agent can help you with this, but you’ll generally have to assemble:

Your approved company name application with transaction number
A brief description of your business activities and your SSIC Code
Valid government IDs and registered addresses for individual shareholders, partners and directors
Your company Constitution
Consent to Act as Company Director, signed by all directors

Once you’ve registered your new business you can also change any entity information easily through Bizfile⁵.

Tax liabilities of Sole Proprietorship and Pte Ltd

If you’re a sole proprietor in Singapore your profits are taxed at your own personal income tax rates.

That’s because you and your business are not considered to be separate entities. You’ll pass your profit information to IRAS as you may do your salary details if you were employed, and the amount of tax you’re liable is calculated from this.

Conclusion

There’s no single best option between Sole Proprietorship vs Pte Ltd, but the fact that each structure works differently probably means that one leaps out as being closer to your needs that the other.

If you’re looking for a simple option to work alone, and you don’t mind the liability for any debts your company may accrue, sole proprietorship is a popular choice. On the other hand if you intend to grow your business locally or internationally, a Pte Ltd might make more sense.

This guide gives you plenty to think about as you make your decision. And while you’re planning your next Singapore business venture, remember to also check out Wise Business for easy, low cost ways to manage your business finances across 40+ currencies.

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Sources:

Sources checked on: 29th April 2025

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