Questions on starting Sole Prop

[ravensfan]

Hi all,

1.Should I bother with starting a Sole Prop if my freelance/side-gig income is under RM1k per month? What if income is between RM1k and RM3K?

2.Apart from the monthly renewal fee, are there any disadvantages to having a Sole Prop? My understanding is that there are few to no disadvantages? Whereas having a Sole Prop allows you to claim additional tax deductions like purchase of equipment and business expenses (Computer, Phone, Tablet, Electricity, Internet Subscriptions, Entertainment, etc)

3.As a Sole Prop, will I need to maintain financial statements (e.g. BS, P&L, TB, SOE, CFS)? Per my understanding, there will be no share capital/equity. At most, there will be a Fixed Assets register to keep track of Fixed Assets purchased and used for Capital Allowance tax deductions.

4.Do I need actual invoices billed to my name/trade name for it to be qualified as Sole Prop Income? What if there is no proper invoice as in it's just an random gig with some chat/email screenshots, spreadsheet to record hours spent? Should I still prepare a placeholder invoice in this case?

5.Should I bother with a Trade Name for Sole Prop? If I proceed with opening a Sole Prop without a Trade Name, can I still add one later on?

6.If I stop working freelance for a while, say I return to employment under a registered company, do I need to close my Sole Prop? Or can I just let it sit dormant while filing 0 business income in Form B?

Thanks in advance

 

[jtra5]

@ravensfan Adding to @jobenerogala's answer:

(3) Nope. I actually think unless your tax bracket is high enough, don't bother with tracking capital expenditures and fixed assets, they get a bit complicated.

Sole prop doesn't need to produce all those documents that limited companies are required to. Just do basic bookkeeping, track all revenues and operational expenditures (office/coworking rentals, work travels, internet etc) and you should be fine.

(5) If you have a trade name, you likely need another bank account opened under that trade name too. I won't sweat extra RM 30 and just put all the sole prop income in my existing bank account. It's not the best practice but it's reasonable effort that is still legal.