Converting a Sole Proprietorship or a Limited Liability Partnership to a Private Limited Company

Last modified: December 12, 2015

Private-Limited-Company-singapore

The business structure underlying a Private Limited Company (PLC) is far more dynamic and powerful than a Sole Proprietorship (SP) or a Limited Liability Partnership (LLP). Many of the sole proprietors and members of LLPs, after realizing the obstacles in expanding their business in its present form, start looking for the alternatives. Their best option is to convert their businesses into a PLC.

In Singapore, a PLC is denoted by including terms like ‘Pte Ltd’, ‘Private Limited’ and is incorporated under the Singapore Companies Act, Chapter 50. Being a form of Limited Liability Company, it limits the liability of the owner i.e. shareholders. A Singapore tax resident company benefits from the tax incentives, the ease of raising capital and the other benefits that an entity having brand image can get.

Steps to Transform an SP or LLP to a PLC

The following are the steps that the owners of the SPs or LLPs would have to initiate to convert their business into a PLC.

Step #1 – Incorporate a New Private Limited Company

The business owners, first, need to register a new private limited company. They need to inform ACRA, the Company Registrar that the new entity intends to carry on the business activities of their old firm.

The new PLC can take the name of the old business; however, the owner needs to submit a ‘No Objection Letter’ to the ACRA explaining the motive behind the move. In addition, they need to disclose the termination date of their SP or the LLP.

Step2# – Transfer Existing Business Contracts and Assets to New PLC

The owners have to register all the old business contracts and assets in the name of the new private limited company.

The owners need to pay special attention to the following items.

  • Assets – The assets of the SP or the LLP needs to be converted into the paid-up capital. The owner must pay off all the creditors of the old business before transferring the assets to the new PLC.
  • Bank Account – The owner needs to close the bank account used for the SP or LLP and open a new corporate account for the use of new PLC.
  • Lease & Contract Agreements – Register the lease and contract agreements in the name of new PLC.
  • Licenses & Permits – Apply and acquire necessary permits and licenses before starting the business activities of the PLC.
  • GST Registration – The owner should cancel the GST registration of the old business upon registration of the new PLC. Get the PLC registered for the GST.
  • MOM / CPF Account – Transfer employees’ MOM and CPF accounts to the new PLC by submitting properly filled MOM and CPF forms to the concerned authorities.

Step3# – Dissolve the Old Business Firm

Cease the activities of the sole-proprietorship or the LLP within in the 3 months from the date of registration of the new PLC. Intimate the Company Registrar about the cessation of the business activities of the old business.

For dissolving an LLP, initiate the strike-off or wind-up process. Winding up an LLP is costly.

Converting an SP or LLP to a PLC is a complicated task. It is necessary to appoint a competent and qualified firm to handle it. You can depend on experts from the SG Company Incorporation for achieving a successful transition.