After running a Sole Proprietorship or Partnership, some owners may want to expand its business to a company limited by guarantee. This strategy is advisable as it has various of benefits such as, a company limited by guarantee provides legal protection to assets, better liability protection, excellent tax benefits and many more.
This article will share useful information on how one can convert its sole proprietorship / partnership business into a private limited company.
Step 1: Incorporating a Private Limited Company
The first step that one should do is to ensure that he/she meets the requirements to set up a private limited company in Singapore. Then, the owner has to produce a unique name for the company, one that is not taken by other existing companies/businesses. However, if he/she wishes to continue using the existing name of their business to their private limited company, they may do so by submitting a ‘No Objection’ letter to the Company Registrar.
Step 2: Transfer business matters from existing business to Private Limited Company
Next, all business assets have to be formally transferred to the newly incorporated private limited company. This process has to be swift as the existing Sole Proprietorship/Partnership has to be closed down within 3 months from the incorporation date.
The transfer will include:
- Assets – The net assets of the Sole Proprietorship/Partnership can be converted as the paid-up capital for the company, via new resolutions and further agreements/contracts. Any outstanding debts to the creditors have to be settled before the transfer of the assets.
- Bank Accounts – All bank accounts maintained by the Sole Proprietorship/Partnership have to be closed within 3 months from the incorporation date. A new bank account has to be opened under the private limited company. In addition, all cheques and bank transfers need to be in favour of the new private limited company.
- Contracts / Service Agreements / Leases – The contracts, service agreements and leases that are signed under the Sole Proprietorship/Partnership business will have to be novated or re-signed under the new entity.
- Licenses and Permits – Generally, most of the licenses and permits are not transferable, thus, one has to reapply to the government authority issuing the licenses and permits.
- Goods and Service Tax (GST) – If the existing Sole Proprietorship/Partnership business have been registered for GST, it should be cancelled on the day of incorporation of the new company.
Step 3: Terminate the Sole Proprietorship/ Partnership
Finally, the Sole Proprietorship/Partnership business has to be terminated and the owner of the business has to apply for a ‘Cessation of Business’ to ACRA to notify them of the closure of the business.