Singapore has no procedure that turns a sole proprietorship into a company. Companies can merge with one another, through amalgamation under the Companies Act, because each company is a legal person. A sole proprietorship is not a legal person: it is its owner, whether an individual, a company or an LLP, trading under a registered business name, so there is nothing to merge or convert. What people call converting is three jobs: incorporate a new Pte Ltd, move the business into it, and close the SP registration.
The company exists from the day ACRA approves it.
Contracts, assets, staff, licences and bank accounts move over in whatever time they need.
The SP is closed once nothing is left in it.
The company exists from approval, the business moves at its own pace, and the SP is closed only when nothing is left in it.
This guide has four chapters: the common reasons owners make the move, the two ways to pace it, the four tasks in the order you do them, and what running the company involves afterwards. It covers the change of structure only, and chapter 1 is written for the usual case, an owner who is an individual. A sole proprietorship can also be owned by a company or an LLP; the three jobs are then exactly the same. Registering the company itself is explained in our Pte Ltd guide, and the company’s first tax filings in Your First Corporate Tax Return. ACRA: choosing a business structure
1Common reasons people make the move
The reason behind most moves is liability. As a sole proprietor, you and the business are the same person in law, so the business’s debts are your debts. If a customer claims for a job that went wrong, or a supplier is left unpaid when trade turns bad, the claim can reach your savings, your car and your share of your home. A shareholder in a private limited company is liable only up to the share capital they have paid in. The company owes its own debts, and its creditors look to the company’s assets rather than yours, unless you have signed a personal guarantee. Companies Act 1967
Tax is the second reason. A company pays corporate income tax at a flat 17% on its chargeable income. As a sole proprietor, the business profit is added to your other income and taxed at personal rates that rise in steps to 24%. Where the two cross depends on how much the business makes and on the costs only a company carries, such as a secretary and annual filings. At a modest profit, the sole proprietorship can still cost less. Our first corporate tax return guide shows how a company’s tax is worked out. Liability and tax aside, four other reasons come up again and again. IRAS corporate tax rates · IRAS personal tax rates
Bringing in partners and investors
A company issues shares, so a partner or investor can take a defined stake. A sole proprietorship has one owner and nothing to sell a part of.
Credibility with customers and banks
Some larger customers and banks prefer to deal with a company, which has its own legal standing.
A business that outlives you
The company carries on if you step back, fall ill or die. It can be sold, or its shares passed on, without starting again under a new registration.
Business money kept apart
The company has its own bank account and books. What you take out is salary, dividends or a loan repaid, so business and personal spending stay apart.
None of this comes free. In return for limited liability and the rest, the company takes on duties a sole proprietorship never had: an annual return filed with ACRA, financial statements prepared every year, a company secretary, statutory registers kept up to date, and corporate tax returns filed with IRAS. Each has its own deadline and its own cost, so the company costs more to run than the sole proprietorship did, even in a quiet year. Our annual compliance guide sets out the full calendar.
If you are deciding whether to convert at all
The decision usually turns on three things:
- How much does the business make, and is that growing? At a modest profit, the extra running cost can outweigh any tax saving.
- How exposed are you to claims? Work that can go expensively wrong, long contracts or staff make limited liability worth more.
- Do you plan to bring in a partner or investor? To give an investor a defined stake you need shares, and only a company has them.
For a fuller comparison of the two structures, see our Pte Ltd guide and sole proprietorship guide.
2Two ways to pace the move
Whichever way you go, the legal route is the same: incorporate the company, move the business into it, close the SP registration. What you choose is the pace. You can move everything in one planned handover on a set date. Or you can set the company up and move the business across in stages, with the sole proprietorship still trading while contracts, customers and accounts follow one by one. The figure below sets the two side by side.
All at once
One changeover date
- Prepare
Set up the company and plan the move.
- Move together
Transfer the operations in one planned handover.
- Complete
Run the business through the company and close the SP.
In stages
Two registrations side by side for a while
- Prepare
Set up the company alongside the SP.
- Work alongside
Move operations in stages while the SP keeps trading.
- Complete
Finish the remaining transfers and close the SP.
The difference is how you coordinate the move. Both approaches need the contracts, assets and outstanding SP matters to be dealt with.
Read the figure against your own business. Moving all at once has one busy moment; moving in stages spreads the work out but runs two registrations side by side for a while. Which fits depends on three things: how many live contracts would need to be novated (taken over by the company with the other party’s agreement) or re-signed, how much equipment and other assets have to change hands, and whether customers know you by your business name. If you have few of each, moving all at once is usually simpler. The more you have, the stronger the case for stages.
All at once
Moving all at once suits a business with little to move: a newer business, a service business without much equipment, or one whose handful of contracts can be re-signed in the same few weeks. You pick a changeover date and prepare every transfer in advance. From that date the company does the trading, and the sole proprietorship winds down and is closed. The benefit is a clean line between the two. The cost is that all of the preparation has to be finished before the date arrives.
What works well
- One changeover date, with no period of running two registrations side by side.
- After the handover there is only the company’s books and filings to keep.
- Customers, suppliers and staff know who they deal with from the first day.
- The whole move is finished sooner.
Where to plan carefully
- Customers and suppliers all switch on the same day, which can unsettle relationships if they are not told in good time.
- Customers who know you by the SP’s name meet the company’s name on that day, so some recognition may be lost.
- Every contract has to be novated or re-signed before the changeover date.
- The costs of the move, from documents to new accounts and licences, fall in one period.
In stages
Moving in stages suits an established business: a loyal customer base, a business name people recognise, several contracts running at once, or operations too involved to switch in one go. You incorporate the company alongside the sole proprietorship, then move customers, contracts and assets across as each one is ready, while the SP keeps trading for whatever has not moved yet. Once the last item is across, the SP is closed. The cost is that, for a while, you run two registrations, each with its own books and bank account.
What works well
- Existing customers keep dealing with you without interruption.
- The SP’s name and reputation stay in use while customers get to know the company.
- Contracts and operations move one at a time, as each is ready.
- You can see the company working before you commit the whole business to it.
Where to plan carefully
- Two registrations run at once, each with its own books, bank account and filings.
- There is more administration while the handover lasts.
- The order and dates of the transfers need careful planning.
- Customers and suppliers may be unsure which one they are dealing with, so every invoice and contract must carry the right name.
If you want the company to keep the business name
ACRA will likely reject a company name that is identical to a business name already registered, and that includes your own SP’s. Ceasing the SP first does not free the name either: under the Companies Act, a company cannot be registered under a business name that was ceased or cancelled until one year has passed, unless the Minister consents. So if the company is to carry the SP’s exact name, expect the name application to be refused at first, and be ready to submit a name review request to ACRA with your reasons and supporting documents, such as proof that the SP is yours and its notice of cessation. The review takes time and is not guaranteed, so line up the cessation and the name application together, which again points to moving all at once. Otherwise, incorporate the company under a name that is distinguishable from the SP’s, and keep trading under the SP’s name while the handover runs. Companies Act 1967, s27(1A) · ACRA: name review request · ACRA: reserving a business name
3The tasks, in order
Once you have chosen a pace, the move stops being abstract. Everything the business uses, from each contract and each asset to each licence, the bank account and the people who work for you, has to end up in the company’s name, and each of those is its own small job. Listing them is what makes the move manageable: you can see what is done, what is waiting on someone else and what is still sitting in the sole proprietorship. A worked example shows how the list is built.
Example: a studio’s handover list
Take a small design studio run as a sole proprietorship. It has an ongoing client project, a business laptop, customers who still pay into the SP’s bank account, and one employee. Each of these turns into a question to settle before the handover is complete.
What the studio has | What to decide |
|---|---|
An ongoing client project | Which agreement has to move to the company, and will the client agree to a novation or a new contract? |
A business laptop | What is it worth, how will the company pay for it, and how is it recorded in the company’s books? |
Customers paying the SP’s account | When do customers receive the company’s bank details, and from which invoice onwards? |
One employee | Employment moves to the company automatically when the business is transferred, with service unbroken. When will you tell the employee, and confirm their terms in writing? |
None of these questions is a legal requirement; they are the practical decisions every handover involves. Build your own list from your records, such as contracts, assets, licences, bank and payroll, then work through the four tasks below.
The sheet below is your plan for the move: four tasks, in the order you do them. The first two are preparation, because the company has to exist and the handover has to be planned before anything moves. The third is the move itself, where the employment and GST rules apply. The fourth closes the sole proprietorship once nothing is left in it. The tasks are the same at either pace; moving in stages simply stretches the third one out.
- 01
Incorporate the new Pte Ltd
Done when: ACRA has approved the company.
- Reserve a company name distinguishable from the SP’s; the SP’s exact name needs a name review request to ACRA, even after the SP is ceased (name rules).
- Appoint at least one director ordinarily resident in Singapore.
- Appoint a company secretary within 6 months.
- Decide the share capital and who holds the shares.
- Adopt a constitution and give a registered office address.
- Full walkthrough: our Pte Ltd guide; or let our registration service handle it.
- 02
Plan the handover
Done when: every item has a value, a payment route and a date.
- List every contract, asset, licence, bank arrangement and employee.
- Decide each asset’s transfer value and how the company pays: cash, a loan from you, or shares.
- Write a short transfer agreement: what moves, at what value, from which date.
- Set a changeover date, or a date for each stage.
- Mark what cannot simply transfer; start those applications and novations early.
- 03
Move the business across
Done when: nothing the business uses is still in the SP’s name.
- Novate or re-sign each contract in the company’s name (a novation needs the other party’s agreement).
- Transfer the assets under the agreement and record them in the company’s books.
- Employees transfer automatically (Employment Act s18A): tell them and confirm terms in writing.
- Apply in the company’s name for any licence that cannot transfer, before the company takes over that activity.
- Open the company’s bank account and give customers the new payment details.
- If the SP is GST-registered, register the company and treat the transfer as a going concern: no GST on the assets.
- 04
Close the SP registration
Done when: ACRA records the SP as ceased.
- Check nothing is left in the SP: no open contracts, payments or equipment in its name.
- Settle the SP’s remaining debts; as the sole proprietor, they are your own.
- Cancel licences held in the SP’s name that the company does not need.
- Lodge the notice of cessation within 14 days of the last trading day, or in advance with a future date; once approved it cannot be undone (Bizfile cessation).
- Report the SP’s final year of trading in your Form B the following year.
Sources: ACRA: reserving a business name · MOM: transfer of employment · IRAS: transferring businesses · ACRA: closing a sole proprietorship · Business Names Registration Act 2014, s22
Timing
Incorporation is usually approved within 1–2 working days. The handover takes as long as your contracts and licences need, typically one to six months. The company and the sole proprietorship are separate registrations, so how long they run side by side is a business decision, not a legal timetable: the SP may keep trading alongside the company for as long as the handover needs. Once the SP actually stops trading, though, the notice of cessation must be lodged within 14 days; failing to do so is an offence, with a fine of up to S$5,000. You may also lodge it in advance with a future cessation date. Business Names Registration Act 2014, s22 · ACRA: closing a sole proprietorship
4Running the company afterwards
The move is finished when the company is trading and the SP registration is ceased. From then on, the company keeps its own calendar. Most of its filing dates follow from its financial year end rather than from your personal tax year, and missing them carries penalties. The four groups below are what that calendar holds for most small companies. The first two apply to every company, although GST registration only becomes compulsory once taxable turnover exceeds S$1 million. The other two depend on whether you employ staff and what the business does. IRAS: do I need to register for GST?
Corporate compliance
- File the annual return with ACRA every year
- Prepare financial statements for each financial year
- Keep the statutory registers up to date, including members, directors and controllers
- Hold an AGM, unless the company qualifies to dispense with it
- Show the company’s name and UEN on invoices, letters and other business documents
Tax
- File the Estimated Chargeable Income (ECI) with IRAS, unless the company qualifies for the ECI filing waiver
- File Form C-S or Form C every year
- Register for GST once taxable turnover exceeds S$1 million
- Keep proper accounting records to support each return
Employment
- Pay CPF contributions for eligible employees as their employer
- Pay the Skills Development Levy (SDL) for each employee
- Buy work injury compensation insurance where the law requires it
Industry licences
- Register with Singapore Customs if the company imports or exports
- Hold the licences your sector needs in the company’s own name
- Update professional body registrations to show the company
The guides below give the detail behind each group. Our annual compliance guide sets out the yearly calendar of returns, financial statements and meetings. Your First Corporate Tax Return walks through ECI and Form C-S for the company’s first year. Our director guide explains what you take on as a director, which is a different role from being a sole proprietor. If you would rather not track the deadlines yourself, our corporate secretary service keeps the registers and filings in order.