You may have heard that a Private Limited company is more valuable than a Sole Proprietorship. This is because if you are looking to expand the business, you are able to gain legal protection to your assets, have more options to funding, gain corporate tax incentives and attract quality talent. Converting your business to a private limited from sole proprietorship may be the next step if you are looking to take your business to the next level.
But, how do you convert your business? What factors do you need to satisfy for the same? How is converting your Sole Proprietorship into Private Limited beneficial to you in the long run?
If you want to grow your business, a Private Limited can change how your business grows. Even though it’s a more complex business structure, Private Limited companies can be better than Sole Proprietorships due to tax benefits, better public perception and separate liability. But first, let’s explore the essentials of conversion and the requirements you need to meet for eligibility, as advised by the best corporate secretarial services in Singapore.
Eligibility Criteria for Private Limited
The following set of criteria determines the eligibility for converting an Sole Proprietorship into a Private Limited:
- At least one shareholder (individual or corporate entity)
- One resident director
- One company secretary
- Initial paid-up share capital of at least S$1
- A physical Singapore office address
Once this set of criteria is satisfied, an Sole Proprietorship can convert itself into a Private Limited. Hiring company incorporation services in Singaporecan help you. Such service providers collaborate with legal advise, prepare all the necessary documentation that need to be filed and drafting the constitution of the company.
Requirements for the Conversion
While eligibility is a different issue, the steps required for converting into a Private Limited structure are as follows:
- Incorporate a new Private Limited company, you will need a letter indicating that you have no objections using the business name as the name of the Private Limited company. You also have to indicate that the Private Limited company is to take on the business on the Sole Proprietorship and the effective date.
- All the business assets must be formally transferred from the Sole Proprietorship and Private Limited. These includes closure of old bank accounts and reopening of new ones under the Private Limited company, any assets or debts, contracts, service agreements and licenses.
- Lastly, the Sole Proprietorship must be terminated and ACRA is to be informed that you have ceased to carry on business as a Sole Proprietorship now.
Benefits of Conversion
When you covert a Sole Proprietorship into a Private Limited Company, the laws affecting your business change. The key benefits of Private Limited conversion from Sole Proprietorship are:
- In the opinion of the best company incorporation services in Singapore, Private Limited are beneficial over Sole Proprietorship as you can raise funds for higher capital instead of being limited to your capital
- Shares and warranties restrict liability in a Private Limited company compared to the Sole Proprietorships, where it’s entirely on the owner and their assets.
- A Private Limited benefits from perpetual succession as it’s legal existence is not contingent on yours. Family members who are interested in continuing the business after your demise is able to do so.
If you’re looking to convert your Sole Proprietorship into a Private Limited, Interactive Accounts can help you with bespoke corporate secretarial services in Singapore. Check out their website and get help with structured accounting frameworks right away. You needn’t worry about the financial aspect of running a Private Limited anymore with assistance from the best firm in Singapore.