5 ADVANTAGES OF CONVERTING A SOLE PROPRIETOR TO A PRIVATE LIMITED COMPANY.Due to the low cost of registering a sole proprietorship ($115) in ACRA, majority of the people who want to start a business will choose to register as a sole proprietor or as a partnership in ACRA for a start. Given that there is minimal compliance to fulfill annually and there isn’t a requirement to prepare the financial statements, it is favourable for people who dislike regulations.

However, when the business starts to grow over the years, you may start to worry about the personal tax payable to IRAS every year and the potential risks you are exposed to.

Therefore, in this post, I will be sharing with you what are the 5 benefits of converting a sole proprietorship to a private limited company.


Tax exemption

As a sole proprietorship, the profit received yearly will be tax personally based on the individual income tax rate. Unfortunately, there is a limit on the tax rebate you can claim per year. For example, if you are receiving a profit of $100, 000 a year, your tax payable excluding the rebate and relief will be $5650.


Tax rate calculation

$100, 000

(First $80, 000 = $3350 and Next $40, 000 tax rate at 11.5% = 2300.  

$3350 + $2300=$5650)


A start-up company, on the other hand, will be exempted for tax based on the chargeable income of $100, 000. This is because companies are exempted of tax for the first 3 year of assessment capped at $200, 000 on the chargeable income of $200, 000. 

Additionally, for Year of Assessment 2016 & 2017, companies can enjoy 50% Corporate Tax Rebate capped at $20,000 per YA.



Limited liability

You are not a separate entity as a sole proprietorship. On the plus side, you have full control of your operations and financial gains but the downside of it is that you are also liable for all debts and legal actions against you as an individual. Your liability is not limited and you risk losing your assets and wealth. 

Whereas, a private limited company “protects” you against potential risk or liability. The liability is limited to the paid up capital of the company if the company is solvent.

However in some circumstances, the court may ignore such separate personality and treat the company and its member as one for limited purposes which commonly known as “lifting the corporate veil.”



Sole proprietors are individual business entities with no partners. You are unable to have investors to be part of your business as there is no form of exchange or security. It is also very unlikely that any investor will fund the business without the ability to control it. 

An exempt private limited company can have up to 20 members as shareholders and this position will grant them with the right to vote. The company has the rights to sell part of the shares to potential investors as an exchange for funding. In return, the investor will have the rights to vote during decision-making or the strategic direction of the company that could affect the interest of the stakeholders.


Strong public perception

In the eyes of the public, a private limited company is considered stable and credible in the sense that they are governed by regulations and are required for annual reporting. It instills in customers the confidence to do large-scale business with you and potential employees with strong expertise are more likely to join you as well.


Future succession

The business will cease when the sole proprietor passes away or retires, since its legal existence belongs to the owner only.

A private limited company, as a separate legal entity, does not cease to exist if one or more of its shareholders passes away and the ownership of the company can be transferred or sold. Its corporate existence lasts as long as its shareholders decide that it should. A company’s life is usually perpetual.

To summarise the entire post, the advantages for conversion are favourable to growing business, intention for further expansion and continuity. The basic cost of maintaining a private limited company are: Corporate Secretarial,Accounting Services and Taxation fees. The cost can be found under the page of fees & charges. Interested sole proprietors can send in your enquiry to find out how to convert your business into a private limited company today.



  1. “Ch.16 Singapore Company Law”. Singaporelaw.sg. N.p., 2016. Web. 3 Aug. 2016.
  2. “Corporate Tax Rates, Corporate Income Tax Rebates, Tax Exemption Schemes And SME Cash Grant – IRAS”. Iras.gov.sg. N.p., 2016. Web. 3 Aug. 2016.
  3. “Features Of A Company – ACRA”. Acra.gov.sg. N.p., 2016. Web. 3 Aug. 2016.

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