- Employment Pass Eligibility: Educational Qualifications Is Required By September 2023
- Comprehensive Guide To Hawkers Development Programme In Singapore
- New Update: What You Need to Know About the Senior Worker Support Package 2023: Up to S$125,000 Grants for Companies
- Comprehensive Guide To Temporary Fair Permit In Singapore
- Comprehensive Company Guide: CPF Contribution for Employees
- New Update: What You Need to Know About the Senior Worker Support Package 2023: Up to S$250,000 Grants for Companies
- Employing Workers with Special Needs in Singapore - What Other Grants Support Is There? [Updated]
- Simplifying the Process: How Tender Lite is Making it Easier for SMEs to Win Government Contracts
- How To Decide When To Refinance Or Reprice For Your Loans
- Singapore's First Career Conversion Programme For FinTech Talents
Step-By-Step Guide On How To Convert Your Sole Proprietorship or LLP To Pte Ltd In Singapore
Converting a sole
proprietorship or limited liability partnership (LLP) to a private limited
company (Pte Ltd Company) in Singapore is a relatively straightforward process.
It requires the business owners to go through the necessary legal and
administrative steps, such as registering with the Accounting and Corporate
Regulatory Authority (ACRA), acquiring the necessary licenses, and setting up
the company's bank accounts. This guide will provide an overview of the steps
that need to be taken in order to successfully convert your business from a
sole proprietorship or LLP to a Pte Ltd in Singapore.
Definition Of Pte Ltd And LLP
Pte Ltd and LLP are two of
the most common business structures in Singapore. Pte Ltd stands for Private
Limited Company and LLP stands for Limited Liability Partnership. Both of these
business structures have their own advantages and disadvantages.
A Pte Ltd is a private
company that has limited liability, meaning that the company shareholders are
not personally liable for any debts incurred by the company. It also has a
separate legal entity, meaning that it can own property, enter into contracts,
and sue or be sued in its own name. This makes it a preferable option for
businesses looking to raise capital from investors or take on debt financing.
An LLP is a business
structure where two or more partners share profits and losses equally while
having limited liability protection from each other's debts. This means that
each partner is only liable up to the amount they have contributed to the
partnership, making it an attractive option for entrepreneurs who don't want to
risk their personal assets in case of a financial loss or lawsuit against the
partnership. If you are interested in starting an LLPS, you should speak with a
legal professional first to ensure that it is the best structure for your
Benefits Of Converting To Pte Ltd
Converting to a private
limited company (Pte Ltd) offers numerous benefits to businesses. It allows
businesses to protect their assets and reduce their personal liability. It also
provides them with access to more capital, as well as the opportunity to expand
their business operations and attract investors.
Additionally, it offers
greater flexibility when it comes to taxation, allowing companies to save on
taxes (tax benefits) by taking advantage of certain exemptions. Finally,
converting to a Pte Ltd also makes it easier for businesses to establish
themselves as a legitimate company entity and gain trust from customers.
The concept of a separate
legal entity is an important one for businesses in Singapore. Under the
Companies Act, private limited companies are considered to be independent legal
entities that are distinct from their owners. This means that the business and
its owners are treated as two separate personalities, with each having its own
assets and liabilities. This separation provides protection for the business
owners from any financial, criminal, or fiduciary duty issues that may arise
from the business’ activities.
Having a separate legal
identity also allows shareholders to make decisions on behalf of the business
without taking personal considerations into account. This helps to ensure that
all decisions made by the company are based solely on what is best for the
company itself and not influenced by any personal interests of its owners.
Steps For Seamless Conversion
In Singapore, a Limited
Liability Partnership (LLP) is great as in nature of business for SMEs and
start-ups. However, as the business grows, it may be beneficial to convert an
LLP into a Private Limited Company (Pte Ltd). To do so, there are certain
eligibility criteria that must be met. We will also look at the various steps
involved in the process for conversion and the advantages of making such a
What Do I Need To Consider When Converting From LLP To A Pte Ltd?
To be eligible for company conversion, the following criteria must be met:
The company has been set up in Singapore for at least 3 years.
The company must have possession of the Certificate of Incorporation.
The company's name will not
change during the conversion process. This is because this process is only
applicable to firms that were previously called LLP's but are now looking to
switch their status and become a Pte Ltd.
The private limited liability
companies registered with Company Registrar who wish to convert cannot contain
any letters other than those in the company's name. A company cannot be
registered with Company Registrar as its sole director, but can act through a
Limited Liability Partnership or a General Partnership.
What Steps Are Needed To
Prepare: Requirements After Conversion
First Step: No Objection Letter (*if you want to retain the business name and also state whether the companies are owned by the same person)
As the sole proprietor,
writing a letter expressing no objection to a private limited company using
your business name is the initial step. After completion of the process, the
sole proprietorship business will be terminated.
Second Step: Memorandum and Articles of Association (when incorporating a Singapore company)
The next step is to incorporate the current business as a private limited company with the same name as the sole proprietorship. This new company must include:
- A minimum of one resident director;
- A minimum of one shareholder;
- A minimum of one corporate secretary is required;
- A starting capital of at least SGD1;
- A physical address in Singapore that has been registered.
After meeting all the
requirements, the business can be registered as a private limited company in
Singapore. Gather needed and other supporting documents and fill out the
application form, then wait for ACRA's approval.
Third Step: Amending Business Assets To A Newly Incorporated Company After Approval
After the application for a
private limited company is approved, transferring any assets from the sole
proprietorship - such as contracts, licenses, and bank accounts - must be done
through official channels.
Assets - Before
transferring net assets to the new Pte Ltd, any unpaid debts of
the sole proprietor must be paid and resolved first.These net assets
subsequently become part of the paid-up capital for the Singapore business, and
are not counted as its income.
Bank Accounts - Upon
incorporation of a private limited company, the bank accounts associated with
the sole proprietorship must be transferred to the new company within three
months. The prior account should be closed and all future payments and bank
transfers should be made out to the new business.
Contracts - All existing
agreements for the sole proprietorship should be transferred to the private
limited company in addition to signing new contracts with the private limited
Licenses - Government
licenses cannot be transferred, so the private limited company will need to
reapply for them once their incorporation is finalized.
Final Step: Business Closure As A Sole Proprietorship
To complete the total
conversion, the termination of the sole proprietorship must be legally
acknowledged. Once the incorporation is verified by ACRA, they will inform that
the sole proprietorship has officially been registered as a Singapore private
limited company and is no longer in operation.
Converting your sole
proprietorship or LLP to Pte Ltd is an important step for businesses that want
to grow and expand. It offers more flexibility when it comes to ownership
structure, capitalization and taxation, i.e. one of the major incentives. Furthermore,
having the “Pte Ltd” suffix can help with branding and positioning the company
in the market.
Overall, the decision to
convert from LLP to Pte Ltd is one that should be taken seriously as there are
several legal, financial and operational implications involved. It is important
for businesses to seek professional advice before making this decision so they
can make an informed decision.
Frequently Asked Questions
How much does it cost to
establish an LLP in Singapore?
The cost of registering a Limited Liability Partnership (LLP) in Singapore in the first year is estimated to be US$1,940, while the annual cost in the second year and beyond is expected to be US$600.
What is the difference between an LLP and a sole proprietorship?
When it comes to compliance, a private limited company is subject to more regulations compared to a Limited Liability Partnership (LLP), which has fewer requirements to follow. On the other hand, a sole proprietorship, also known as a one-person company (OPC), is easy to set up but is subject to high tax rates. Meanwhile, both a partnership company and sole proprietorship have unlimited liability, making them less suitable for multiple business owners.
Does an LLP require a separate business bank account?
It is mandatory for a Limited Liability Partnership (LLP) to have a dedicated business bank account to conduct its financial transactions and separate personal finances from the business finances. This is just like a limited company, which must also maintain a separate business bank account to meet compliance requirements.
Read also: A Comprehensive Guide To ONE Pass
Read also: SME Business Banking – Open Your Account Online with CIMB BusinessGo Lite in Just 15 Minutes*, Anytime
Read also: 5 Key Things SMEs Need To Know About Being GST-Registered 2021
Got a Question?
WhatsApp Us, Our Friendly Team will get back to you asap :)
Share with us your thoughts by leaving a comment below!
Stay updated with the latest business news and help one another become Smarter Towkays. Subscribe to our Newsletter now!