Converting from sole proprietor to a Singapore private limited company

Sep 14

Converting from sole proprietor to a Singapore private limited company

This article was also published on e27.

A client recently asked us how to convert their business from a sole proprietorship to a Singapore private limited company. Here’s how 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:

  • Assets. 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.
  • Contracts. 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.

Reasons to convert to private limited company

A sole proprietorship has the following drawbacks:

  • Unlimited liability. Creditors can claim against your personal assets, including your property.
  • No corporate tax benefits. Taxes are at the personal income tax rate. For net profits greater S$100,000 p.a., this is not tax effective. Many tax shields enjoyed by private limited companies are not available.
  • Raising funds. Limited to cash injections from personal finances and using retained earnings.
  • Valuation. Perceived as having less value than private limited companies.

Need a hand converting your sole prop to a private limited company? Drop us an email below.


The information given is of a general nature and may not be applicable in a specific situation. Under the Terms of Use of this website, we disclaim liability for any act done or omission made on the information provided and any consequences for any such act or omission. For specific legal advice, you should seek professional legal assistance.