Get you proprietorship business converted in to private limited company seamlessly
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Registering a Convert your Proprietor Business to Private Limited Company is quick, easy and can be done online with TAXOUTLOOK in 3 Simple Steps
Our experts provide you all the information needed
You share us all the relevant documents
Relax!!We will get the things done
The proprietorship model is a single owner business with unlimited liability. The proprietorship model may not be suitable as the business grows due to funding requirements and also a need for perpetual succession and reputation. A private limited company has many advantages over the Proprietorship in the aforementioned areas. The private limited company is registered under the Companies Act, whereas a proprietorship has no formal registration. Registration of a business under the Companies Act as Private Limited Company boosts the credentials of the business as the business details can be verified with the MCA database.
To convert a proprietorship into a private limited company, a Sale agreement needs to be entered between the sole proprietor and the company. All the assets and liabilities of the Sole proprietorship business gets transferred to the newly formed private limited company. The sole proprietor should hold at least 50% of the voting share capital for the next 5 years to avoid capital gains tax (Income tax).
Benefits The advantages of conversion of sole proprietorship into private limited company are as below. Unlimited Liability In case of sole proprietorship, the business owner has to make good from his personal assets for any default in business. Whereas the private limited company offers limited liability protection. Perpetual Succession On the death of sole proprietorship, the business ceases to exist. The private limited company is unaffected by such events. It has a perpetual succession. The shareholders can change over a period of time but the company as a distinct entity continues to operate unless it is wound up in accordance with Companies Act ,2013. Capital Funding It becomes easier to raise capital funding under the private limited company as it offers flexibility. In the case of Sole proprietor, capital can be brought in by said business owner only. Whereas, in a private limited company, capital funding can be obtained from any person. The best choice of investors is a private Limited company. FDI A Private Limited company does not require FDI approval under the automatic route. Whereas FDI is not possible in the sole proprietorship model. Again, Foreign Direct investment is an important criteria for growing business to manage its capital needs. Method Conversion of Sole proprietorship into private limited company is done as below. 1. Slump sales formalities to be completed by the Sole Proprietor. 2. Register a new company with the main object of takeover of a sole proprietorship included in the Memorandum of Association (MoA). Prepare a takeover/sale agreement and incorporate the assets and liabilities of the sole proprietor in the newly formed private limited company.
1. Proof of identity of all Directors.
2. Proof of address of all Directors.
3. Passport size photo of all directors.
4. NOC from the landlord in case of leased/rented premises.
5. Copy of utility bill of the registered address to be mentioned.
6. MOA and AOA of the proposed company.
Our compliance expert will be in touch with the documents. Once you share these documents, we will complete the filings of necessary forms with RoC.
1. Apply for DSC for the proposed Directors.
2. Apply for name approval
3. File incorporation form with MoA and AoA.
4. MoA main objects should include takeover of sole proprietorship business.
5. Complete the takeover process and incorporate all the assets and liabilities of the sole proprietorship in the newly formed private limited company.
You don’t have to worry about the above process as our Compliance experts will help you in getting the company registration smoothly, quickly and hassle-free.
DIN
DIN represents Director Identification Number. DIN is specific and unique to an individual. Even if an individual is director in multiple companies, he has to obtain only one DIN. No person can be appointed as a director in any company without DIN.
RoC
Registrar of Companies
MoA
Memorandum of Association is the charter document of the company. It contains all the main objects and the incidental objects related to the main objects of the company. Simply put, it lists the business objects of the company for which it is formed.
It all depends on the size, age, capital and the growth requirements of the business. Sole proprietorship business is typically suitable for small business/ freelancers. It has also got less compliance costs when compared to private limited company. However, a private limited company has its own advantages in terms of Fundraising, Choice of angel investors, Limited liability and reputational advantage.
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