Incorporating a Private Limited Company in Singapore
Even though Sole Proprietorship is the easiest and simplest business structure in Singapore that you can register to do business, it comes certain major disadvantages that must be understood and considered.
Disadvantages of Sole Proprietorship
No Separate Legal Entity
There is no separation between the business owner and the business. This means that you are fully liable for all debts and legal actions filed against the business. Your liability is unlimited, and creditors can legally sue you or obtain court orders to claim your property and personal assets to recover the money owed. Also, since the legal existence of your business is tied with you, the business cease to operate with your retirement or demise. This will also lead to the end of the business entity, which could have become very successful and well-known, with no perpetual succession.
No Corporate Tax Incentives and Benefits
Singapore government offers generous incentives to companies in a bid to promote their growth and sustainability. As a sole proprietor, you are not eligible to tax incentives and benefits. Taxes are calculated based on your personal income, and you do not benefit from special tax benefits that private limited companies enjoy. Finally, a sole proprietorship is only an option to local business owners. Foreigners who want to do business in the country are required to incorporate a private limited company.
Converting Sole Proprietorship to Private Limited Company
For the above various reasons and more, converting your sole proprietorship into a Private Limited Singapore company is a wise decision, especially when you want to:
- better protect your assets and minimise your liabilities
- acquire more financing to expand your business
- enjoy Singapore’s corporate tax incentives and
- improve public perception of your company’s identity and credibility
Contact VentureHaven today to convert from Sole Proprietorship to Limited Liability
There are 3 steps involved in the conversion from Sole Proprietorship to Limited Liability:
- Incorporate a Private Limited (Pte Ltd) company
- Transfer all business matters from existing business to new Pte Ltd company
- Terminate the Sole Proprietorship
Your existing sole proprietorship business must be closed within 3 months of incorporating your new Private Limited company. Therefore, please take special note of the following:
- New bank account/s under the new Private Limited company must be opened, while banks account/s of the sole-proprietorship must be closed.
- Assets of the sole proprietorship to be transferred to the new Private Limited company can be converted into paid up capital via various resolutions and contractual agreements.
- Debts owed to creditors, including summonses, fines and penalties, must be settled before the transfer of relevant assets.
- Contracts and agreements signed under the sole proprietorship must be renewed under the new business entity.
- Licences and permits that are non-transferable must be re-applied from relevant issuing authorities.