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And today we are going to touch on our first unincorporated business entities.
Sole Proprietor (SP)
SP is a business owned by a single person. Because a SP is an unincorporated entity, the rights and obligations of the business become the rights and obligations of the SP. The law does not differentiate between Sole proprietorship’s owing and the SP owing. Meaning, if any of the customer successfully sues the sole proprietorship, then the SP is personally liable for it. In Singapore, it is a preferred business entity used by neighbourhood businesses, shops and hawker stalls.
A SP has a unlimited liability as far as the business is concern. What the business owed is also owed by the SP without any limitation. Hence, the personal assets of the SP can be sought after by any unsatisfied creditors of the sole proprietorship. Because of this unlimited liability characteristics, it discourage people from using sole proprietorship. Majority of the business owner would wish to protect their personal assets from the risk of failure which is inherent in any business venture. Nevertheless, some business people still decide to operate as a sole proprietorship because of it low set up cost and easy requirements for maintaining it.
A sole proprietorship can be dissolved easily as there are less restriction from the governing body. However, the SP should pay off all his debts before doing so. If not, the creditor may sought after the SP personally to recover their debts. The only formality required for the dissolution of the sole proprietorship is that the SP must send a notice of cessation of the business to the Registrar of Businesses within 14 days of ending the business. After which, the certificate of registration will then be cancelled.