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How and Why Can I Convert a Sole Proprietorship into a Private Limited Company in Singapore?

Author Nataliya DzharianiNataliya Dzhariani

4 min read
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How and Why Can I Convert a Sole Proprietorship into a Private Limited Company in Singapore?

It makes sense to convert when you see that your business is doing very well. A Sole Proprietorship is a great way to test ideas. Once you know you’re going to stick with your business, it's time to consider setting up a Pte Ltd (that's is what how they shorten "a private limited company" in Singapore). Another good reason to convert is if you plan to start hiring. And the most practical motivation one can have is that you think your taxes are too high.

If you want any help with this, check out our company secretary service in Singapore!

Why is a private limited company better?

  • Limited liability. If things go wrong, a proprietor pays all the debt from his pocket. A company, being a separate legal entity, protects you from that.
  • A proprietor is on his own. You can’t involve other partners. Your children cannot inherit your business. We hate to be indelicate, but if a proprietor retires or dies, so does his company — while a private limited continues to exist.
  • Fundraising is easier. Loans become easier and you can attract investors — a regulated company incurs more trust than a single person.

What about my money?

A private limited company 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 private limited company 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$84,827 a year in profit. And if you make S$120,000 a year, you’ll save S$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$84,827 profit a year

SP Pte Ltd
Taxes S$3,905 S$3,605
Corporate secretary S$300
Total expenses S$3,905 S$3,905

Scenario 3: S$120,000 profit a year

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

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

Converting actually means 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 private limited company — 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  should also happen within 3 months after incorporation. Osome can do that for you, 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 will have to apply for a new one — these cannot be transferred.
  • Consider which assets (for example, your equipment, cash, or even real estate) you want to transfer. If there are things you don't need anymore, you may want to sell or lease them.


Can a Private Limited Company take a loan from a bank?

According to the Companies Act, which was established in 2013, loans by Private Limited Company could be accepted from banking institutions as well as from Directors and any other corporation.

Is a Private Limited Company a corporation?

The main difference between a company and a corporation is the size. A corporation is a bigger business entity than a company.

Can a private limited company give loans to outsiders?

A Private Limited Company cannot give loan to any other individual or corporate bodies which is beyond 60% of its Paid-up Capital + Free Reserves + Security Premium, or 100% of Free Reserve + Security Premium.

What are private limited company advantages and disadvantages?


  • A Private Limited Company is a legal corporate body. The law sees it as a juridical person with its rights and responsibilities.
  • The Shareholders have limited personal liability and their personal assets are safe
  • If the Shareholders die or transfer their shares the company doesn’t cease to exist
  • The process of shares transferring is easy
  • Your company has the right to certain tax deductions by IRAS
  • You can legally have 100% of foreign shareholders


  • It is relatively difficult to register a Private Limited Company in Singapore as the Singapore Companies Act has a set of strict rules and regulations you must comply with
  • The cost to set up and maintain the growth of such a company may be higher, not to mention the fact that there are obligatory annual filing requirements to consider
  • It is mandatory to hire a bookkeeper, an accounting service provider and a corporate secretarial service all of which can be costly, but with our help it won’t be an issue.

How a private limited company is formed?

A private limited company can be established by one or more persons by incorporating the company with the help of Companies House. The process includes signing a Memorandum of Association, completing Companies House Form IN01 and paying the registration fee.

Who owns a private limited company?

A company can be owned by individual people, trusts, associations and/or other companies. The owners are called shareholders.

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.


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