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Convert Proprietorship to Private Limited Company
Transition from Proprietorship to Private Limited Company to Accelerate Business Growth
₹ 13000 only
Convert Proprietorship to Private Limited Company
When starting a business, many choose a sole proprietorship due to its minimal compliance obligations. However, as the business expands, it becomes important to limit liabilities and reduce the compliance burden on the owner. Converting a sole proprietorship into a private limited company is an effective solution. For this conversion, the promoters need to create an agreement outlining the sale of the business. Additionally, the Memorandum of Association for the new private limited company must explicitly state that one of its objectives is "the takeover of a Sole Proprietorship Concern."
Benefits of Transitioning from Sole Proprietorship to Private Limited Company
Separate Legal Entity, Resulting in Limited Liability
A private limited company functions as an independent legal entity, distinct from its members. This structure allows the company to own assets, enter contracts, and initiate legal action against third parties if disputes arise. Importantly, the shareholders and directors are not personally liable for the company's debts beyond their investment in the company.
Simple Transferability
Ownership of the business can be transferred to an individual or another company by transferring shares, with the approval of the shareholders. This process is considerably simpler than in a sole proprietorship, where such a transfer is not permitted.
Limited Liability for Directors
In a private limited company, the personal assets of the directors are protected from claims related to the company’s debts. Only the funds invested in the company or its assets can be utilized to settle any outstanding liabilities.
Continuous Existence
A private limited company is recognized as a separate legal entity, granting it perpetual succession. Unlike a sole proprietorship, it remains unaffected by the death or departure of any member. The company continues to exist regardless of changes in its membership.
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Provide us required Documents
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Our expert team will manage the Conversion of Proprietorship to Private Limited Company
Certificate of incorporation will be mailed after completion of registration
How to Convert of Proprietorship to Private Limited Company with Corporate Shastra
Documents Required for Transitioning to a Private Company
PAN Card: Provide the PAN Card of all directors and shareholders. Foreign nationals can submit their passport.
Address Proof: Include Aadhar Card, Voter ID, Passport, or Driving License for all directors and shareholders.
Photograph: Submit recent passport-sized photographs of all directors and shareholders.
Business Address Proof: Provide the latest Electricity Bill or Telephone Bill for the registered office.
NOC from owner: Obtain a No Objection Certificate from the owner of the registered office.
Rent Agreement: If applicable, include the Rent Agreement for the registered office.
Income Tax Returns Acknowledgement: For NRIs or Foreign Nationals, documents must be notarized or apostilled.
Explore Conversion of Sole Proprietorship to Private Company in India
What are the key requirements/factors for registering a private limited company?
A Pvt. Ltd. company would need two or more members who shall act for as directors of the said company. It is a general practice that the shareholders of the company play the role of directors. It does not require any minimum amount to be infused as capital. However, a certain fee must be paid to the Government for issuing a minimum of shares worth ₹ 1 lakh [Authorized Share Capital] during company registration. Also, there is no requirement to show proof of capital invested during the registration process.
Is a Private Limited Company structure suitable for my business?
For how long is the Company registration valid?
Comparison of Business Structures
Proprietorship | Partnership | OPC | LLP | Private Limited | |
|---|---|---|---|---|---|
Ownership | Sole Ownership | Min 2 partners Max 50 partners | Only 1 member | Min 2 Designated Partners | Min 2 Directors Min 2 Shareholders Max 15 Directors Max 200 Shareholders |
Separate
Legal Entity | No | No | Yes | Yes | Yes |
Applicable Law | No specified Act | Partnership Act, 1932 | Companies Act, 2013 | Limited Liability Partnership Act, 2008 | Companies Act, 2013 |
Statutory Audit | Not Mandatory | Not Mandatory | Mandatory | Based On Applicability | Mandatory |
Liability | Unlimited | Unlimited | Limited | Limited | Limited |
Perpetual Existence | No | No | Yes | Yes | Yes |
Ownership Transferability | No | Yes (Restricted) | Yes (Restricted) | Yes | Yes |
Taxability | Low | High | Moderate | High | Moderate |
Compliance
Requirement | Low | Low | High | Moderate | High |