It is better to understand the pros and cons of both business models. That will help you in deciding on which type of business registration would be ideal for your company formation.

What Is A Sole Proprietorship?

Most small and local businesses prefer registering for the sole proprietorship model. If you are unsure of the process, you will need to hire reliable company incorporation like us to get it done perfectly.  We have an excellent track record of offering the best accounting, tax, litigation, and GST-related services in Singapore. A sole proprietorship is a business model owned by a single entity. It can be a company, a person, or a limited liability company.

There is no separate legal entity, so the business owner is responsible for every liability while running the business. In the nutshell, the company’s risks and liabilities will be attached to the assets owned outside of the business (personal) by the proprietors. So, if the business faces losses, the lenders can claim for recovery from the company assets, as well as from the assets that are personally owned by the proprietors.

Singapore citizenship holders of 18 years and more can apply for a sole proprietorship. It doesn’t mean a foreigner cannot apply. Foreigners can register for the sole proprietorship business model but will need to appoint a representative residing in Singapore.

The authorized representative will offer solutions that fully adhere to the Singapore rules and regulations for running businesses. Sole proprietorship registration is valid for 1 year, so the owner will have to renew on an annual basis.

Pros

For a low investment startup, the best option is to go for a sole proprietorship. Some perks of choosing sole proprietorship include –

• Uncomplicated to set up.
• Cheapest registration fees.
• Compliance needs are minimal
  [no need for external auditing of accounts for filing your annual returns].
• No shareholders, so need to share the profits.
• The owner can end the sole proprietorship firm without many complications.

Cons

Your business venture might be eligible for sole proprietorship but it may be not the right alternative at times. Some cons of a sole proprietorship are –

• Limited capital
• Unlimited liability.
• No detached legal entity.
• Is not eligible for benefits on corporate tax.
• Profits fall under the owner’s income, so it is exposed to a 22% tax bracket.
• Public opinion is low but the credibility can be improved with proactive customer relationships.

What is A Private Limited Company In Singapore?

In Singapore, a private limited company is preferred as it adds to the credibility of a business. It is more advanced and offers limits the risks of business losses. These businesses can have stakeholders, investors, directors and hired employees.

In a private limited entity, a distinct legal entity is created. Your personal liabilities get limited, which means if the company experiences losses or declines, it does not affect the assets that you own in a personal capacity.

A company can be 100% locally or foreign-owned. It is unlike a sole proprietorship, where no foreign partners are allowed. Just a single Singapore citizen must be present among the group of directors. The director must reside in Singapore and must be 18 years and above.

Pros

Private Limited registration makes way for tax benefits and several other advantages –

• Personally not held responsible for losses incurred in the business, on the business debts..
• The company is a detached legal entity from its directors and shareholders.
• The profits are taxed at 17% of corporate tax rates.
• Ownership can be reassigned.
• New companies receive tax exemptions and incentives.
• Raising capital is easy.
• Foreign investors feel interested.

Cons

Sometimes, a private limited company is not a good alternative.

• The compliance requirements are more, enforced by IRAS & ACRA in Singapore.
• Business operation costs are high.
• Directors must release the company’s information.

Sole proprietorship Business Vs Private Limited Company

Ease of registration

The steps to complete in registering sole proprietorship includes –

• Registration of a business name that cost $15.
• Approval of business name gives you 120 days window to set sole proprietorship.
• Submit $100 as a registration fee for a sole proprietorship. The approval can happen in just about 50 minutes.

For a private limited company, the process is a little more complicated. To build a company you must –

• Appoint one shareholder at least.
• Appoint one director at least.
• Appoint company secretary.
• Prepare the company constitution.
• Declare financial year-end.

After all this preparation, you can register a private limited company just like the sole proprietorship. Registration fees is just $15 for sole propriety and $300 for the company.

Ownership

A sole proprietorship means solo – a single person can run the business with no distinct legal entity. If will become a partnership firm if there is1 or more partners.

A private limited company has a distinct legal entity. The number of stakeholders ranges from 1 to 50. They can be individuals, other companies, or a mix of both.

Now, you know what the difference between a sole proprietorship and a private limited company is. Weigh the pros and cons of both business models and choose the one that suits your needs.

The significance and necessity of bookkeeping services

• With updates about cashflow, the small to medium enterprises in Singapore can operate a successful business. 
• Monthly financial statements include detailed accounting schedules that are sub-categorized. You gain an overview of the cash on hand.
• You can identify where your cash is used and if necessary create a plan on how to save.
• You can even get to know about the fluctuation in cash flowing in and going out. The fluctuations can be low or high. However, you can take steps to find a solution. 
• During tax audits, organized bookkeeping smooth’s the process.
• You are confident to make crucial decisions as you are aware of your financial status and this helps to feel in control.
• In large organizations, where is plenty of cash flow, the possibility of embezzlement at any level is high.
• Bookkeeping embezzlement is at a minimum as the numbers are consistently watched by the bookkeepers and business owners. 
• If you intend to borrow for expansion or merger, the detailed bookkeeping schedules are invaluable. When the time comes to visit a bank, the paperwork is prepared and the lenders see you have sufficient cash to cover the mortgage. It is proof that you are operating an income-generating healthy business.
• If you plan to sell the business, then the major selling point is the amount of money you pull each month and the bookkeeping helps in deal closing. The potential buyer sees accounting paperwork as proof and takes action.

Bookkeeping services are necessary not just for Singapore businesses but for every organization around the world. JL Accounts not only offers accounting and bookkeeping services but even handles GST, tax, business incorporation, litigation support, and more.  

List of daily bookkeeping tasks

Daily bookkeeping tasks a reliable bookkeeping service in Singapore streamlines. The professionals use their knowledge and customize a process to streamline the financial workflow of your business.

Track cash position

Clients are advised to keep business liquid. It means watching cash flow to ensure it is sufficient to handle current and upcoming expenses. Lack of cash can place your business under stress and possibly damage goodwill. The cash in hand indicates the financial health of a business, which is crucial for a successful relationship with suppliers and creditors. 

The professionals monitor accounts receivable & payable. This gives you a clear idea of the assets & liabilities. 

Digitalize financial transactions

The advanced accounting system is used to record financial transactions. This allows for keeping track and comparing cash flow. You can check how much is received in cash or credit or when a payment is made to a specific vendor.

File invoices

In Singapore, according to ACRA’s mandate account records need to be maintained and stored for a minimum of five years. The accounting services record every transaction and store invoice copies issued and received. Besides, statutory regulation compliance the records verify purchases and sales, when you file tax claims with IRAS. 

Vendor payments

It is essential to maintain a healthy connection with suppliers. You need to pay them on time to avoid damaging your goodwill in the market. The professionals update accounts and payables regularly. You know which vendor needs instant payment.

On-time payment even helps in getting purchase discounts, extended credits, and other perks. Each dollar saved adds to cash-in-hand. 

Make invoices

Detailed invoices need to be made for getting paid on time. The invoices need to be accurate like include company name, address, date, invoice number, payment terms, and items/services sold. Some companies don’t accept inaccurate invoices.

Bookkeepers are experts and help in properly structuring the invoices. The payment terms mean when you expect payment from clients and how they can gain from following them. The invoice number helps to identify the transaction. 

Anticipated cashflow

The digitalized financial data can be used to understand the profits and expenses. Use this to anticipate the cashflow. It helps to get an idea of how much funds are necessary to fulfill the expenses of future growth and plan for it accordingly. 

Reconcile books of account

The transactions recorded in books of account have to match with bank records. It helps you to stay updated. Annual account preparation depends on the books of accounts. Updated books mean no concerns about last-minute effort.

Track old receivables

Small businesses need to keep track of old receivables because they cannot allow them to accumulate. Overdue payments from clients can hinder the cash flow. The professionals monitor and advise you to take action. Add a step in the payment terms about what action to take in case of consistent missing due dates. 

Generate a fresh balance sheet

With a few clicks, the accounting service will generate a fresh balance sheet. It offers an idea of the real-time financial status. If the growth rate is not improved as expected, review things and plan accordingly. 

According to the Companies Act amendment from 2014, every company must go through a thorough audit to follow the guidelines. Some of the common forms are the statutory and the tax audit. To deal with a tax audit in Singapore, you must be aware of some fundamentals before filing for taxes. Read on to learn more about the process and whether you need professional accounting or bookkeeping services:

How does tax audit work?

Due to the COVID-19 pandemic, Singapore has sustained a prolonged economic recession that has caused considerable company deficits. In this regard, the government has dedicated almost S$100 billion to cushion the economic effects of the pandemic in 2020 alone.

Undoubtedly, the trend will likely continue in 2021. Therefore, the Singapore local tax authorities will keep a close eye on the tax landscape in the country. Ultimately, the focus on tax governance aims to address any tax leakages and raise the overall revenue.

Which companies can apply for tax audit exemption?

In the past, the ACRA excluded companies with annual revenue of $5 million from the auditing process. However, the Companies Act amendment from 2014 changed the criteria, introducing new requirements for audit exemption. In this regard, you must be aware of the concept for a small company. According to the ACRA website, a company must fulfil at least two of the criterion to fall into the category:

• The firm must have annual revenue of $10 million or less;
• The total gross assets must not amount to more than $10 million at the end of the financial reporting period;
• The company mustn’t have more than 50 employees at the end of the financial year.

Keep in mind that some additional conditions may qualify firms that are part of a small group of companies. The former must meet at least two of the following criteria:

• An aggregate turnover of SGD 10 million or less;
• A balance sheet total of less than SGD 10 million at the end of the financial reporting period;
• The average number of employees mustn’t be more than 50 for the same period;
• Holding and subsidiary companies are eligible for audit exemption if they fulfil the requirements;
• If you are unaware of your company’s eligibility, consult with an advisory or accounting company.

How to minimize the risk of a tax audit?

Usually, tax audits are serious issues that may get you in trouble. Since the government focuses on fighting tax fraud and evasion, expect penalties regardless of whether you have any criminal intents. Still, some precautions will ensure you don’t put your business at risk.

Ensure you file accurate financial records

According to the Income Tax Act and the GST Act, all companies must keep proper business records for at least five years. Typically, the IRAS may want to review them if needed, but that’s not necessarily the case.

File your annual taxes on time

Another crucial rule is always to file your annual income and GST taxes on time. Usually, the due dates for income are 30 November (for paper filing) and 15 December (for online filing). If you’re filing your GST taxes, the due date is one month after the end of the accounting period.

Either way, filing accurate financial information on time will reduce the chances of errors and, thus, tax investigations.

Disclose any past tax evasion behaviour voluntarily

Perhaps, you may have previously evaded taxes. In such cases, you should consider disclosing such behaviour voluntarily. The IRAS has a particular Voluntary Disclosure Programme under which you may receive a lighter penalty. To qualify for reduced fines, you must:

• Make an accurate and complete voluntary disclosure;
• File your voluntary disclosure in due time, usually before the IRAS orders a tax audit.

Cooperate with the IRAS

Perhaps, one of the key considerations is to cooperate with the IRAS and make a disclosure. When you pay or cooperate with the Revenue Agency, you will avoid further prosecution. Also, you may reduce the penalty rate by two times in place of prosecution.

Seek professional accounting service

Typically, audits can be pretty scary for business owners, especially when they have little knowledge of the matter. Given the current conditions, you should hire a professional accountant. That way, you’ll minimize the risk of owing more taxes than expected.

Other considerations

Of course, you should never forget that your chances of a tax audit are sporadic. Typically, the IRAS randomly performs investigations on companies and applies the case-by-case method to ensure proper coverage. Besides, the Agency is less likely to investigate companies that have been punctual and meticulous.

Also, keep in mind that a tax audit doesn’t necessarily mean you’re in trouble. In some cases, the Revenue Agency may want additional documentation. Sometimes, they may want a response to a particular item. Either way, the reason for the audit might be a simple legal procedure or a random decision. In such cases, it’s best to cooperate and offer your help to avoid unnecessary trouble.

Final Thoughts

Fortunately, JL Accounts provides an expansive range of accounting services related to tax audit services. The company’s experts will ensure your company keeps proper tax records and files all annual taxes on time. As a result, you’ll eliminate the administrative burden and avoid tax investigations in the future.

Contact us if you need professional help regarding accounting, GST or tax-related issues. We also provide additional help such as GST audit services, GST filing, litigation support and company incorporation services.

One of the integral aspects of the consumer and business world is the Goods & Services Tax (GST). Indeed, it’s an essential part of the IRAS’ strategy for local and foreign company taxation. Since 1994, the IRAS has reviewed, changed, and improved the GST rates, filings, and paperwork regulations.

If you’re a business owner, the constantly shifting taxation conditions may prove to be a bit of a challenge. This is why you should consider hiring bookkeeping services to avoid such hassle. In such cases, the best way to remain competitive is to comply with the GST regulations. While many accounting professionals can help you, it’s a brilliant idea to grasp some basics. Read on to learn more about the basics of GST auditing, how it works and its requirements.

What is a GST audit?

In short, a GST audit is the process of checking your day-to-day business transactions. In Singapore, the government imposes this type of audits to ensure that every company reports correctly and accurately its taxes. Typically, they’re looking for any lapse in paperwork and errors in claiming input tax, among others.

Furthermore, the IRAS can conduct a GST audit through email, letter or in-person. In most cases, the officers will request documents and interviews with the company head personnel. As expected, such a process is often time-consuming, as the verification and submission take up valuable time and effort.

What is the purpose of the GST audit?

Undoubtedly, the primary purpose of the IRAS’ GST tax audit programme is to ensure all your returns comply with the laws. Still, a GST tax audit doesn’t necessarily mean you’re in trouble. In most cases, the IRAS’ sole purpose is to educate you on tax obligations and assist you in filing your taxes. In other words, they can help you get a better understanding of the tax laws, policies and processes.

How does a GST audit work?

As already mentioned, a GST audit ensures that you’ve filed your taxes correctly and accurately. In this regard, the officers need to verify that you’ve adequately accounted for the GST in your business transactions. Also, you must report everything in your GST returns.

Most of the time, the procedure involves checking for the correct classification of your supplies. The IRAS will also review whether you’ve accounted, paid and claimed your GST taxes correctly. Let’s not forget about the total value of supplies, purchases and taxes report.

How does the IRAS select your company for a GST audit?

Usually, a GST audit can cover a broad range of industries. While it may target a particular company, it’s mostly a random and routine activity. In other words, the IRAS doesn’t assume that the selected business has made GST errors. Perhaps, the main idea of the periodical audits is to check the general level of compliance. Therefore, the agency will ensure that every case gets a fair review.

What are the GST audit requirements?

During a Goods & Services check, you may provide the Revenue Agency with information about your business. This data may include arrangements and the running of the company. Also, you must present your sales and purchases listings to verify the figures you’ve reported in your GST returns.

Make sure you have documents to support your transactions. Typically, this includes invoices and export documents. There are self-review checklists that you must fill in during the pre-registration input tax claim or bad debt relief. In some cases, the IRAS may ask your customers and suppliers for confirmation about whether your GST returns are accurate.

How to comply with the GST filing law?

Of course, there are several ways to minimise the risk of GST audits and increase the chances of success in audits. Perhaps, the first thing to do is engage your staff with sound GST knowledge and adequate experience. For example, you can pay for qualification programmes or let your personnel apply for GST courses by the Tax Academy. 

Another healthy habit is to practise good record-keeping. Typically, using a computerised accounting system will make the process much easier for you and the IRAS. Keep in mind that the software you plan to use must comply with the agency’s technical requirements.

Undoubtedly, conducting periodic reviews of your returns and disclosing any errors voluntarily will keep your record clean. You’ll get a penalty reduction under the IRAS Voluntary Disclosure Programme when you report a mistake voluntarily. Otherwise, get a professional like us regarding GST filing services.

Rely on Professionals

To conclude, it’s safe to say that GST audits won’t necessarily put you in trouble. Still, you should be ready when the IRAS selects your business for a review. In this regard, you should rely on professionals like JL Accounts. The experts at the company will offer a wide range of accounting assistance, including GST audit services. Ultimately, a seasoned accountant will help you deal with the tedious task of filing your GST taxes and claims.

We also provide an extensive range of services such as tax investigation services, litigation support, and financial management.

As a result, Singapore is considered one of the best places for doing business in the world. It does not matter if its a sole proprietorship or a private limited company, whether you’re a foreigner or a local entrepreneur, incorporating in Singapore comes with specific requirements. Here’s detailed information about the laws and rules that you need to comply with to start a business:

Standard Requirements for Company Registration in Singapore

While there’s plenty of room for your firm to grow, Singapore has some strict guidelines that business owners must follow. Here are some of the most crucial factors to consider when registering a new company:

Shareholding

Your firm must have at least one shareholder – either a natural person or a corporate entity. The shareholding can be 100% foreign, but there’s a limit for a maximum of 50 shareholders.

Share Capital

Similar to other countries, there’s a minimum paid-up capital requirement. In Singapore, it’s 1 Singapore dollar. Of course, you can always increase the share capital by injecting additional funds.

Directors

Fortunately, the Singapore government allows both local and foreign resident persons to be directors in their company. However, you cannot appoint a corporate director in your firm. Any business must have at least one resident as its director. A resident is every Singapore citizen, permanent resident or Employment Pass holder.

Company Secretary

Another essential rule requires new companies to appoint a qualified secretary. They must conduct the appointment within six months of the incorporation. As expected, the secretary must be a natural person and a resident of the country, too.

Registered Address

Undoubtedly, one of the crucial factors to consider is the company’s address. One of the guidelines requires new business corporations to have a local registered address in Singapore. Also, this location mustn’t be a PO box, as it will serve as the place for keeping all your statutory documents.

Company Name

Last but not least, you must come up with an original name for your company. Before you launch your business venture, it has to go through approval.

How to Register a Company in Singapore

Typically, the registration is online, which makes the entire process quick and efficient. Of course, there are a few steps that you need to go through to complete it.

• Approval of your company’s name;
• Preparation of the registration documents;
• Finalise the company registration with the ACRA.

Bear in mind that there are some fees that you need to pay upon registration. For example, the initial government fee for a company name application is S$15. Also, you will have to pay S$300 government fee for the registration of your company. Here’s a thorough elaboration on all the steps for the registration:

Company Name Approval

First and foremost, every Singapore company has to apply for name approval with the ACRA. Usually, the procedure is simple, and business owners can do it online. Still, you need to make sure your company name complies with the following guidelines:

• The name must be unique and not identical with other existing businesses in the country;
• It mustn’t infringe other trademarks;
• It mustn’t contain obscene or vulgar words;

If your company name complies with all ACRA’s rules, you will get approval in less than an hour. However, you may have to wait for a few weeks if the name needs to go through reference to another government authority.  Typically, the reason for such procedure is when the name contains specific business-related words like “finance”, “broker”, or “school”.

Once you get approval, you can reserve the company brand for up to 120 days. In turn, you must incorporate the name within the specified period. Otherwise, the name will become available for reservation by another person.

Registration Documents Preparation

After you finish the procedure for name approval, you need to make sure you’ve prepared your registration documents. In all cases, the ACRA asks for a Signed Consent to Act as a Director for each director. Moreover, you’ll need identical consent from the company secretary. Also, you’ll need to disclose each officer and shareholder’s identification and residential address details.

Furthermore, your Corporate Service Provider (CSP) must comply with the international AML regulations. In other words, the ACRA requires the CSP to conduct a Know Your Customer (KYC) procedure.

The due diligence will look into the verification of ID and address proof documents. What’s more, you’ll have to provide information about the professional background of the stakeholders in the company.

Registering with the ACRA

After you’ve met all the documentation requirements, it’s time for the actual registration. Thanks to the accessible online platform, you can register with the ACRA without an effort. Typically, the process takes less than an hour. Of course, there’s an exception for the cases where there’s a need for further reference to other government agencies for vetting.

Final Thoughts

To conclude, business incorporation is generally an easy and quick process. Still, it would help if you had proper preparation to ensure the process is smooth and hassle-free. If you’re new to the business, JL Accounts provides high-quality company incorporation services.

Whether you’re a foreign entrepreneur or a Singapore resident, our accounting experts will help you submit all the required documentation, and provide business and marketing solutions. In turn, you’ll save valuable time and energy to focus on building your dream business in Singapore.

We also provide an extensive range of services such as GST audit, tax investigation, financial management, GST filing services and litigation support services.