Converting Partnership to a Singapore Private Limited Company

From Sole Proprietor / Partnership to Singapore Private Limited Company

How to convert your business from a sole proprietorship/ Partnership to a Singapore private limited company. Here’s how to do it in four simple steps:

Step 1 – Consent

As the owner of the sole proprietorship, you will need to write a letter you have no objections using the business name to become the name of a private limited company. This is called a No Objection Letter and explains why you want to retain the business name and whether the same person owns it. 

Step 2 – Incorporate a Private Limited Company 

For most formations, the fee is around S$1,000-2,000, depending on your requirement. At the very least, you will need a registered mailing address, one local resident to be a director and appoint a company secretary within six months of incorporating.

As soon as the private limited company is formed, the owner needs to close the sole proprietorship within 3 months of incorporating the new company.


Step 3 – Asset Transfer

Once we identify the assets/liabilities list that need to be transferred to private limited company, we can either recognise these assets as an ‘amount injected by director’ or ‘share capital’ of the private limited company.

A director’s injection can be an interest bearing loan or non-interest bearing loan (advances).

It is advised you engage a professional to help you prepare the transfer. These computations can be complex, and involve buy / sell notes where one business buys assets and liabilities from another.

Items that will be required to transfer include:


  • The net assets taken over by the private limited company.
  • Bank accounts: You must close all banks accounts maintained by the sole-proprietorship firm and open a new account under the private limited company. This will affect your customers, GIROs, auto payments, so ensure you update stakeholders on the change of account.
  • If you are renting an office for your business, you will need to re-sign the lease agreement under the private limited company. Likewise you may need to re-sign existing business contracts / service agreements.
  • Licences/permits: You may need to apply for new licenses or permits, as these usually cannot be transferred.

Step 4 – Ceasation 

Once the company is incorporated, the sole proprietorship firm must be terminated within 3 months from the date of incorporation. Lodge a Notice of Cessation to ACRA confirming the closure of the sole proprietorship within 3 months from the date of incorporation of the private limited company.

Why Should You Convert To Private Limited Company in Singapore?

In essence, a sole proprietorship has the following drawbacks:

Separate legal entity
When it comes to Sole Proprietorships, the owner and the business are one and the same under the law and in your dealings with the public. Even though you have the privilege of greater autonomy over the business and its operations, you are financially and legally responsible for all liability against the business, for instance for debts and in lawsuits.

As a Private Limited company registered as a business entity under the Singapore Companies Act (Cap 50) has a separate legal personality from the owner, the company members have limited liability.For sole proprietorships, creditors may sue you for debts incurred and reach into your personal assets and property. Therefore a sole proprietor faces a greater risk of complete personal financial ruin compared to a director of a Private Limited company.

Tax benefits
Private Limited companies pay corporate tax on their profits and dividends that the shareholders receive dividends are not taxed. Taxes are determined at your personal income tax rate.

Limited capital
Sole proprietorships often have limited funding-raising options, whether in terms of getting loans from financial institutions or in terms of equity fundraising from investors— which means your sources of working capital are limited to your own money and the rolling over of any profits you make from the business.

Perpetual succession
A sole proprietorship’s legal existence is contingent on your existence, therefore your retirement or demise will automatically mean the cessation of your business therefore your family members and friends who are interested in continuing the business will not be able to do so without the administrative hassle of incorporating the business— which is not the case for a Private Limited company.

Public perception
Sole proprietorships face difficulties in doing business on a larger scale because the perception is less than favourable than if they were to do it with a larger business entity like a Private Limited company. business deals with you. Further, it is also more difficult for sole proprietorships to attract high-caliber employees who are ambitious and who view the business as offering little opportunity for growth as well as being more unstable than a Private Limited company.

Administrative burden
Conversely, the compliance requirements of a Private Limited company are much higher than those of a sole proprietorship, be it in the ongoing compliance or the matters to be dealt with upon winding up are more complex than for a sole proprietorship. Also, the Private Limited company is governed by the laws, rules and regulations under the Singapore Companies Act.

For LLPs, you enjoy a separate legal identity and its ensuing benefits, however, there are still other disincentives:

LLPs, being partnerships, are assessed in such a way that means profits are treated as the personal income of each partner therefore taxed at personal income tax rate that are typically higher than the corporate tax rate upon a Private Limited company.

An LLP will be liable in respect of any debts or legal liability if its partner is liable to them, i.e. the liability of an LLP is to the full extent of its assets.Conversely, an LLP’s liabilities are also the partner’s therefore claims can be made against the partner’s personal assets.

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Financial Statement Preparation:

Directors are required to present accounts that comply with the Accounting Standards and which give a true and fair view of the state of affairs of the company to its shareholders. Our accountants would ensure that your Financial Statement is prepared according to the required Accounting Standards for filing to ACRA (Accounting and Corporate Regulatory Authority). We can also assist you with preparation of AUDITED financial accounts, if required. Check out our Financial Statement Preparation Service.

GST Computation & Submission:

If you are a GST-registered trader, you would need to submit quarterly GST returns to IRAS (Inland Revenue Authority of Singapore). If you need assistance with computations and to avoid missing filing deadlines, check out our GST Computation & Submission Service.

Tax Computation/ Filing:

All companies/ individuals are required to pay corporate tax or income tax to IRAS (Inland Revenue Authority of Singapore) for all income earned or received in Singapore. If you need to understand how to reduce your tax liabilities legally, to compute and file your tax returns on time to avoid penalties, check out our Tax Computation/ Filing Service.