Sole Proprietorship to Private Limited
Separate Legal Entity
The company assets and liabilities are differentiated from private and personal assets and liabilities of shareholders, unlike that of a sole proprietorship.
Company liabilities will not affect shareholders, therefore ensuring that shareholders’ personal assets are more protected as. Should any liability be incurred, it will be the company’s assets that are affected.
Lower Corporate Tax
Tax exemption and lowered corporate tax rates are enjoyed by companies. Revenue dividends given to shareholders are also tax exempted.
Favourable Business Perception
Private limited companies have more favourable business perception than sole proprietorships as a result, institutions are more likely to give out loans to Private Limited Companies. There are also less limitations and hurdles for getting investors since it looks better on paper and takes a more long-term view versus a sole proprietorship.
STEP 1: SUBMIT A LETTER OF NO OBJECTIONThe registered owner of the sole proprietorship must authorize that the Private Limited Company may operate the same name as the previous.
STEP 2: INCORPORATION PROCEDURES.
During the registration, the owner must indicate that the Private Limited Company will assume the operations of the previous sole proprietorship. It must also state the effectivity date of the takeover. The company must also meet the standards of ACRA which include the following items:
- One shareholder
- One company secretary (must be a Singapore resident)
- One resident director
- 1 Singapore Dollar in paid up capital
- Office address within Singapore
STEP 3: FORMAL TRANSFER OF ASSETSAll documented assets and liabilities, including contracts, bank accounts, business permits, licenses, intellectual property rights and the like must be officially turned over to the new Private Limited Company within three months of incorporation. The sole proprietorship must be terminated after this period.
STEP 4: INFORM ACRA OF TERMINATION
ACRA must be served notice that the sole proprietorship will no longer exist as a business entity.
Ultimately, the timeline of converting from a sole proprietorship to Private Limited Company will depend on the number of assets, liabilities and other items being transferred, as well as the complexity of current business operations. Do ensure that you have completely evaluated your business before undertaking the process, as it may be difficult to reverse.
Need help with the conversion and incorporation process? Let our team of business consultants assist you on this and provide you with professional advice based on your business needs.