Business Vehicles: Sole Proprietorship

Business Vehicles: Sole Proprietorship

In one of our earlier posts, we have written about various business vehicles that you can use to conduct your trade. One of them is known as sole proprietorship or also known as sole enterprise. In this post, we will delve further on what sole proprietorship is all about.

Sole Proprietorship & Business

If you intend to start your business by using sole proprietorship as your vehicle, there are several things that you must know.
You can choose to start sole proprietorship either by using your name as stated in your identity documents or by using a trade name. If you choose to use a trade name and not your own name, you are required to apply for trade name approval. There is no need to apply for the approval if you are using your own name as the sole proprietorship’s trade name.

Furthermore, in order to commence the business, you must first obtain Certificate of Registration from the Registrar of Businesses with the help of a corporate secretary firm. The Certificate of Registration must then be displayed at your business premises at all times.

It is also important to be aware that the Certificate of Registration has a validity period. Usually, it is only valid for a year. If you fail to renew the certificate after the expiry of validity period, your sole proprietorship is likely to be struck off by the Registrar of Business.

In that event, you would have no choice but to repeat the registration procedure all over again.

Sole Proprietorship and Legal Personality

In business, the most important thing that must be identified from the beginning is the legal nature of the individual or entity that they are dealing with it. This is important for many reasons; one of which is to determine the legal consequences of dealing with such individual or entity.

We have, on our previous posts stated that a company’s liability and its members’ liability is separate (See Company’s Legal Personality 1 and Company’s Legal Personality 2). This is because after a company is incorporated, the company possess its own legal personality and is considered as a legal person distinct from its member under the law. Unlike company, sole proprietorship does not have its own legal personality.

In law, sole proprietorship and its owner is considered as the same entity. Thus the owner can be made liable for all of the debts incurred by the sole proprietorship. Similarly, he can also claim any benefits that the sole proprietorship is entitled to, personally.


Sole proprietorship is suitable if you are just starting out your business where the risk of liabilities is low. However, as the business grows, it would perhaps be wise to consider converting your sole proprietorship to a company.

This is because, as a sole proprietor, you will suffer unlimited liability personally should the business fails. Furthermore, it will also be more difficult for you to obtain financing to expand your business as most banks considered sole proprietorship as a high risk business.

Therefore, if you are a sole proprietor and are thinking that it is now time to go big; converting your enterprise to a company is definitely an option to be considered. Although most sole proprietors are off the opinion that they can convert their business and set up a company on their own, it would be advisable to seek the help of secretary firm in Johor Bahru to help you in your endeavour.

Otherwise, you might risk incurring unnecessary costs and expense, and waste precious time which would otherwise be used to develop your business.

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