Converting to a Singapore Private Limited Company

If you are currently running a Sole Proprietorship or Limited Liability Partnership (LLP) Singapore business, at some point, you may have considered converting it into a Private Limited (Pte Ltd) company. There are many reasons for this consideration, with most of them linking to ‘expansion’. This conversion will definitely help expand your business, with more opportunities of funding and better protection in terms of personal liability.

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 you are ready to take this step further with your business.

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

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 Pte Ltd company.

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

 

You will note that the conversion from either a Sole Proprietorship or LLP to a Pte Ltd company will benefit your business in many aspects. Though a Pte Ltd company involves a heavier administrative burden, it offers more liability protection and flexibility in terms of funding and expansion. When you are ready to proceed, 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: Incorporation of a new Pte Ltd company

To begin the process, you will need a name for your new Pte Ltd company. It is subjected to approval, as under Singapore Law, no two entities are allowed to have the same company name. It is possible to use your existing company name from your Sole Proprietorship or LLP business, by submitting a ‘No Objection Letter’ to the Company Registrar. The letter should include your request to retain an existing business name, an explanation on why you wish to do and prove that both companies (the existing entity and new Pte Ltd company) are owned by the same person.

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

Upon incorporation of the Pte Ltd company, you will have 3 months to cease operations of your old entity. All transferring must be completed before the deadline. 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 Pte Ltd company 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 Pte Ltd company. However, before each conversion, it’s debt (if any) must be fully paid or reassigned to the new entity. All business debts (including Government fine instalments or private instalments) must also be re-assigned to the new setup company. 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 Pte Ltd company. 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 Pte Ltd company 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 Pte Ltd company. 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 within the 3 months deadline, 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 LLP, you can proceed with either wind up or strike off of the partnership. 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 from a Sole Proprietorship or Limited Liability Partnership (LLP) to a Private Limited (Pte Ltd) company will offer you more opportunity of growth and protection for your business. However, it is simple said than done and require expert knowledge, careful planning and smooth execution. 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.

Contact us to find out more on how we can help you with your company today.