Converting to a Singapore Limited Liability Partnership

If you are currently running a Sole Proprietorship and are thinking of expanding your business, or if you are currently considering ‘downsizing’ your Private Limited Company (Pte Ltd) but wish to keep the advantage of liability protection, either case, converting to a Limited Liability Partnership (LLP) may be the right option for you.

As an experienced firm in this matter, Timcole is here to reassure you that this conversion is possible. However, before you proceed, we advise that you take some time to consider whether this is the option you wish to obtain for your business.

Differences between Sole Proprietorship, Private Limited Company (Pte Ltd) and Limited Liability Partnership (LLP)

To assist you in this important decision, we have listed down the differences in each entity and what you will benefit or expect from a conversion to a LLP.

Aspect	Sole Proprietorship	Private Limited Company (Pte Ltd)	Limited Liability Partnership (LLP)
Legal Entity	Owner and the business are one legal entity.	All shareholders and the business are separate legal entity.	All partners and the business are separate legal entity.
Liability	As the owner and the business are considered one under the law, the owner holds unlimited liability for all outstanding debts and legal actions against the business.	The business takes its own financial and legal liability. Shareholders are not legally and financially responsible for all liability against the business.	The business takes its own financial liability. Partners are not financially responsible for any liability against the business, or other partners’ wrongdoings in the business.
Capital	Difficult in raising capital. Capital may be limited to the owner’s own finance and profits from the business.	Easier to raise capital with more public funding-options available.	Difficult in raising capital. Capital may be limited to members’ contributions and profits from the business.
Taxation	Tax is determined by personal income tax rate, thus, higher than the corporate tax rate.	Tax is determined by corporate income tax rate. You benefit from tax incentives offered to the entity.	Tax is determined by personal income tax rate, thus, higher than the corporate tax rate.
Perpetual Succession	The owner’s retirement or demise marks the cessation of the business.	Endure structure beyond any shareholder’s retirement or demise. Equity shares go on in perpetuity.	A partner’s demise marks the cessation of the business.
Public Perception	Low public perception which may affect business cooperation, loan applications and higher difficulty in hiring high-caliber employees.	High credibility and strong public perception. It stands a better chance in successful business dealings, loan approval and hiring of high-caliber employees.	Moderate public perception which may affect business cooperation, loan applications and difficulty in hiring high-caliber employees.
Government Grants	Limited grants available.	More grants available.	Some grants available.
Administration	Lighter compliance and administrative burdens.	More compliance and heavier administrative burden. In case of termination, a more complex procedure involved. More restrictions and governed under Singapore Companies Act.	Moderate administrative burden. In case of termination, a complex procedure involved. Some restrictions and governed under Singapore Companies Act.

LLP stands out as an entity offering more expansion opportunities than a Sole Proprietorship and holds a slightly less administrative burden compared to a Pte Ltd. Importantly, it also offers a similar liability protection as a Pte Ltd company. When you are ready to proceed with the conversion, Timcole can assist you in the whole process.

Conversion Process in 3 Steps

For a better understanding of the conversion process, we have summarised the procedure into 3 steps.

Step 1: Registration of conversion to LLP

To begin the process, you will need to apply with the Registrar stating your intention to convert. You will also need a name for your new LLP. It is subjected to approval and may be rejected if all requirements are not fulfilled.

Step 2: Transferring all assets and matters from Sole Proprietorship or Pte Ltd to new LLP

Upon incorporation of the LLP, you will have to cease operations of your old entity and transfer all necessary assets, liabilities and obligation to your newly converted LLP. Business items that require transferring include:

Bank Accounts – All bank accounts under the old entity must be closed. You will also need to open a new bank account under the name of your approved LLP and inform all relevant bodies and customers on the change.
Business Assets – Any asset from your previous entity can be transferred into paid up capital for the new LLP. However, before each conversion, it’s debt (if any) must be fully paid or reassigned to the new entity. If the transferring asset is a property under the old entity, the conversion may require GST, stamp duty or any legal cost.
Leases / Contracts / Service Agreements – You will need to re-sign all leases, contracts, service agreements or any other legal documents necessary for the operation of your new LLP. We advise that you inform and seek approval from all necessary bodies (including landlord) before you proceed with the conversion.
MOM / CPF Accounts – You can transfer your existing MOM and CPF accounts from your old entity to the newly setup LLP by filling the relevant forms. Alternatively, you may choose to close your existing MOM and CPF accounts and open new ones under the new setup.
Licences / Permits – You will need to apply for new licences and permits necessary for the operation of your LLP. Most of the Government issued are not transferable and thus re-applications under your new entity are required.

Step 3: Cessation of Sole Proprietorship or LLP

After the completion of all the necessary conversions, you are ready for the termination of the old entity. For a sole proprietorship, you are required to submit a Notice of Cessation to ACRA, confirming its closure. For a Pte Ltd, you will need to proceed with either wind up or strike off of the company. In most cases, we will recommend the latter as winding up involves a more complicated procedure than the other.

How Timcole can Help You

The conversion to a Limited Liability Partnership requires expert knowledge, careful planning and smooth execution. Thus, it is highly recommended that you seek professional help in this important matter. With years of experience, Timcole can provide assistance and advice on all aspects mentioned above or any other queries you have.

Timcole is one of the leading company incorporation and accounting firm based in Singapore. Our wide range of professional services serve as a one-stop solution for your business, offering you the most affordable price for services conducted with the highest level of excellency.