Freelancers vs Self-Employed Persons vs Sole Proprietors
What is the difference between the three terms?
“Freelancers” loosely refer to those – that conduct work as a contract for service. Some freelancers may declare themselves as Self-employed to IRAS, while others may declare themselves as Sole Proprietors. Some freelancers may even register a private limited company. They may employ other freelancers, while providing contractor/sub-contracting services to another company.
According to the Inland Revenue Authority of Singapore (IRAS), A self-employed person is defined as someone who performs work for others (e.g. provide a service) under a contract for service.
As a self-employed individual with your own business, you work for yourself and you are in the position to realise a business profit or loss. Your income is derived from the buying and selling of goods, or from providing professional or personal services.
A self-employed may be a sole-proprietor or a partner in a partnership.
A sole-proprietorship is a type of registered business enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole proprietor does not necessarily work ‘alone’—it is possible for the sole proprietor to employ other people.
As prescribed by section 5 of the Business Names Registration Act (BNRA), all types of businesses except those exempted (see below) must be registered with the Accounting and Corporate Regulatory Authority (ACRA).
If you intend to carry on your business as an individual under only your full name, you are exempted from registration. Similarly, if you carry on business with one or more other individuals, you would be exempted from registration if the name of the firm is the full name of all the individuals.
However, if your business name includes descriptive words before or after your name, such as “John Tan Videography”, you must register your business.
Some other exemptions include:
- Any institution, authority, person or fund whose income is tax-exempt, as specified in the First Schedule to the Income Tax Act;
- Any society registered under the Societies Act or the Co-operative Societies Act;
- Any mutual benefit organisation registered under the Mutual Benefit Organisations Act; and
- Any trade union registered under the Trade Unions Act.