Upgrading Sole Proprietorship or LLP to LLC (Pte. Ltd) in Singapore
The information given below will serve as a guide for answering many questions related to the conversion of sole proprietorship or LLP to an LLC. In many countries, a private limited company is called as an LLC, PLC, corporation, and Pvt. Ltd. In Singapore, it is referred to as Pte. Ltd, and is registered under the Singapore Companies Act, Chapter 50.
It can be said that the decision of converting to an LLC is a wise decision, because of the many advantages associated with it. This change will enable you to expand your business, provide protection to the company’s assets, curb the limit of liability to be borne by the owner, avail the benefits of tax incentives, ease of raising capital by attracting investors, and the ability to recruit high quality talent.
An LLC stands as a separate legal entity, and need to pay the taxes for profits on the prevailing corporate tax rate. The shareholders receive their dividends tax-free.
Steps to Convert a Sole Proprietorship or LLP to an LLC
Leaf through the steps given below to find out how a sole proprietorship or an LLP can be converted to LLC.
- Registration of a new private limited company is the first step. At the time of incorporation, the owner needs to mention that the newly formed company is going to take over the business operations of the sole-proprietorship or the LLP. The owner is also required to mention the date of termination of the sole-proprietorship or the LLP.
- The owner should get all the business contracts and the assets transferred to the newly formed private limited company.
- Finally, the sole-proprietorship or the LLP should be terminated, and the company Registrar i.e. ACRA should be informed about the cessation of business undertakings of the sole-proprietorship or the LLP.
Step 1 – Register a New Private Limited Company
This is the first step of the conversion process. To start with, you have to get the approval of the business name. In Singapore, the law does not permit two entities to have the same business name. However, if you still want the new entity to have the same business name, then you will have to submit a ‘No Objection Letter’ to the company registrar.
In that letter, you will have to explain the reason behind retaining the old name, and also prove it to them that the owner of both the entities is the same. At the same time, you have to make the provision of ceasing the operations of the old business within 3 months of the date of incorporation of the new company.
Step 2 – Transfer the Business Undertakings from the Existing business to the New LLC
After incorporating the private limited company, the next step is the transference of business matters of the old business to the new one. The items that need to be transferred include –
- Assets – The assets that will be taken over by the Pte Ltd Company can be converted to paid up capital. However, an agreement and resolution is required, and care needs to be taken to clear all the outstanding dues to the creditors before transferring the assets.
- Bank Account – All the bank accounts under the name of the sole-proprietorship or LLP needs to be closed, and a new account under the name of the Pte Ltd Company should be opened.
- Lease Agreement – The lease agreement in case of rented properties need to be resigned under the name of the new private limited company.
- Contract Agreements – All the existing business contracts and service agreements need to be signed under the new entity’s name.
- Permits – The owner has to get a fresh set of licenses under the new company’s name.
- GST Register – If the old business firm is GST-registered then, it is advisable to cancel it on the day of incorporation of the new Pte company. Get the new company GST registered immediately, in order to continue your business transactions.
- MOM / CPF Account – It is necessary to transfer MOM and CPF accounts of your employees to your newly-established Pte company. Fill and submit the relevant MOM and CPF forms to initiate the process.
Step 3 – Terminate the Old Sole-Proprietorship or LLP
Once the new company is incorporated, the old business should be terminated within a span of 3 months from the date of incorporation. A ‘Notice of Cessation’ sent to ACRA confirming the closure of the old business should follow this. It is mandatory that this notice should also be sent within 3 months from the date of incorporation of the private limited company.
On the other hand, in case of an LLP, after the transference of all business matters is successfully done, the owner can choose to strike off or wind up the LLP. Winding up is a much complex process than striking off.
It is advised that you engage a professional Singapore company incorporation firm, if you are uncertain on the steps that need to be followed. SBS Consulting is always there to help you in incorporation of any type of business in Singapore.