Disadvantages of Sole Proprietorship in Singapore.

Disadvantages of Sole Proprietorship in Singapore.

Disadvantages of sole proprietorship.

Disadvantages / Cons of Sole Proprietorship:

• A sole-trader has unlimited liability. This means that if the business should collapse, the sole-trader could loose not only the cash and other assets invested in the business but all his/her personal assets as well excluding HDB flat, to meet the debts of the business.
• As there is only one person with overall responsibility for the success of the business this may increase the pressure on that individual.
• A sole-proprietorship is a business firm owned by one person or one locally incorporated company. There are no partners. The sole-proprietor has absolute say in the running of the business firm. Management rests on that one person and his liability is unlimited.
• There is no requirement for a sole-trader to maintain accounts for auditing purposes however the records shall be kept for five years. For tax purposes, a balance sheet or statement of affairs as at the end of the year and a detailed profit and loss account must be submitted to the tax authorities.
• If such a business fails or is declared bankrupt, the creditors can sue the proprietor for all debts incurred. A legal claim can be made against the personal assets of the proprietor.
• In addition to personal income tax the owner is mandatorily required to top-up his/her Medisave Account for the net trade income after tax assessment
• Sole Proprietor could not transfer the ownership of Firm however the assets & liabilities of the Firm could be easily transferred to another person.