/ Guide

How and Why can I convert Sole Proprietorship into Pte Ltd in Singapore?

When does it make sense to convert?

When you see your business works. Sole Proprietorship is a great way to test ideas. Once you know you’re going to stick with it, consider setting up a Pte Ltd. Another good sign is when you start hiring. And the most obvious one — if you think your taxes are too high.

Why is Pte Ltd better?

  • Limited liability. If things go wrong, a proprietor pays all the debt from his pocket. Pte Ltd protects you from that.
  • A proprietor is on his own. You can’t involve other partners. Your children cannot inherit your business. If a proprietor retires or dies, so does his company — while a Pte Ltd remains.
  • Fundraising is easier. Loans become cheaper and you can attract investors — a regulated company incurs more trust than a single person.

What about money?

Pte Ltd is more expensive to manage — you have to hire a corporate secretary and file annual returns to ACRA. But taxes are super low thanks to a flat rate and a lot of exemptions. Let’s do the math.

A Sole Proprietor pays progressive tax up to 22%. A Pte Ltd pays 17% flat minus all the exemptions . Add a corporate secretary to that — with Osome it’s S$300 a year. It turns out it’s cheaper to convert after you’ve made more than S$92,727 a year in profit. And if you make S$120,000 a year, you’ll save S$2,550.

Scenario 1: S$25,000 profit a year

SP Pte Ltd
Taxes S$100 S$1,062.5
Corporate secretary S$300
Total expenses S$100 S$1,362.5

Scenario 2: S$92,727 profit a year

SP Pte Ltd
Taxes S$4,241 S$3,941
Corporate secretary S$300
Total expenses S$4,241 S$4,241

Scenario 3: S$120,000 profit a year

SP Pte Ltd
Taxes S$7,950 S$5,100
Corporate secretary S$300
Total expenses S$7,950 S$5,400

Ok, I’m sure I want to convert. Now what?

Converting in reality is closing down your Sole Proprietorship and opening a new company. The only thing you can carry on is the name. Here’s what you need to do:

  • Write an appeal to ACRA explaining your name will be used by a new company instead of the proprietorship you are closing.
  • Incorporate a Pte Ltd — Osome will do that for you within an hour.
  • After that, you have 3 months to set up everything for the new company — bank accounts, assets, contracts, licenses.
  • Inform ACRA about proprietorship termination once you are done. That also should happen within 3 months after incorporation. Osome will do that, too.

What exactly do I need to arrange?

  • You need to re-sign all the contracts (rent, suppliers, clients) to the new company.
  • Same goes for bank accounts: close the old ones, open new ones to the company name. You might want to inform your partners as this could mean a delay in processing invoices.
  • If your business needs a license (like a retail shop, a spa or a real estate agency), you’ll have to apply for a new one — these cannot be transferred.
  • Consider which assets (like equipment, real estate or cash) you want to transfer. You might sell or lease them.

Next steps

If your situation is specific or you need more information about the conversion, our experts are here to help. Get a free consultation in our secure chat.