There are a whole host of reasons why a company structure is a more effective business structure and from time to time, sole proprietors or limited liability partnerships may decide to convert their business structure to a company. There are some pros and cons to converting to a company and these should be well thought through before deciding whether to convert. If the eventual decision is to convert, here are the steps to do so:
Step 1: Preparing a No Objection Letter
You would most probably want your new company to have the same name as your sole proprietorship or limited liability partnership. For example, if your sole proprietorship is EXAMPLE TRADING, you would want to incorporate your company as EXAMPLE TRADING PTE LTD. When a name application is filed with the Accounting and Corporate Regulatory of Singapore (ACRA), it will show that that particular name is already taken. This would then require you to submit a no objection letter from the owner of the sole proprietorship or partnership which is yourself.
Step 2: Incorporating a Company
Upon registering the name of the company, the incorporation process is exactly the same as before.
Step 3: Shifting of all business activities to the Company
There are many things which need to be done to formally shift all business activities to the newly incorporated company.
- Opening of bank account
You will need to open a bank account under the new company. You will then need to inform vendors and customers that you are no longer a sole proprietor or a partnership and start to make payments or invoice the new company. All payments to and fro will be through the new company bank account. You may approach the same bank which you had opened a corporate account with. For example, if you have an OCBC account for EXAMPLE TRADING, you can go back to OCBC to open another account for EXAMPLE TRADING PTE LTD.
- Transferring of licences and permits
Certain forms of business activities will require licences. If your business has a licence or permit, you will need to contact the issuing body to transfer or reissue a licence under the new company.
- Contracts with other parties
More commonly there will be a lease with a landlord. There may also be other contracts with suppliers, vendors and clients. You will need to have all these resigned with the new company. In some cases, a novation is acceptable.
The assets of the sole proprietorship can be injected into the company as paid-up capital. If the sole proprietorship has some machinery, it can be placed under the balance sheet of the company and the paid-up capital of the company should reflect this injection of assets.
Step 4: Cessation of the sole proprietorship or partnership
You will need to cease operations as a sole proprietorship or partnership within 3 months. You will need to file a cessation of business with ACRA. Upon ceasing operations as a sole proprietorship or partnership, you will need to close off any bank account under the business entity.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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