Why Convert to Private Limited Company from Proprietorship?
Convert Partnership to Private Limited Company
Most of the business in starting phase preferred to register as a Proprietorship firm because of its lower compliance requirements. With the growth of the business, it is advisable to take action to limit the liabilities and reduce the burden of compliance on a single person, for the same the best option is to convert the proprietorship firm to a Private Limited Company. For converting a proprietorship firm to Private Limited Company, promoters of the company must have enter to an agreement which is to be made for selling the business. The conversion from proprietorship to Private Limited Company must have clearly mentioned in the Memorandum of Association as ‘Takeover of a proprietorship firm’.
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Benefits of Conversion from Proprietorship to Pvt. Ltd Company
Easy Fund Raising
Private Limited Company registration process is stringent enough to make this structure credible among others which make fundraising or borrowing from external sources easier. The organization itself provides a number of ways to raise funds in the form of private equity, ESOP, and more.Show Less
Separate Legal Existence
Once the Company registration in India is done, a legal entity is born in eyes of law. This separates itself from its owners and managers. The company can operate on its own name simply by opening a bank account to own assets and enter into contract with parties. This also provides right to sue third parties in case of any defaults.Show Less
Owners’ Limited Liability
The company’s obligation or debts of does not create a charge over the owner’s personal assets. Their liability stays limited only to the capital subscribed and unpaid by them.Show Less
Management and Ownership Separation
The separate ownership and management help both – the company and the management to focus on their potential works. The shareholders assign responsibility to operate and run the company without losing control in the form of voting.Show Less
Documents Required to Convert Proprietorship to Private Limited Company
PAN Card
PAN Card of shareholders and Directors
Passport
Foreign nationals must provide a valid passport.
Identity Proof
Aadhaar card and Voter ID/ Passport/ Driving License of Shareholders and Directors
Director’s Address Proof
Latest Telephone Bill /Electricity Bill/ Bank Account Statement of Shareholders and Directors
Photograph
Latest Passport size photograph of Shareholders and Directors.
Business Address Proof
Latest Electricity Bill/ Telephone Bill of the registered office address
NOC from owner
No Objection Certificate to be obtained from the owner(s) of registered office
Rent Agreement
Rent Agreement of the registered office should be provided if any
Notarization
In case of NRI or Foreign National, documents of director (s) must be notarized
Formulation of Company Name
Build a Unique Identity
Identification plays an important role in making a business outstand in competitive market, build a unique and distinctive name for your business hence enhance your brand’s trust and value. Consumers should identify activity of your business from the brand name so that they can relate your business with its offerings.Even though it meets all the above criteria, once again make sure that the brand name to be short, easy to remember and simple to pronounce or spell.
Constitution Type
Name of the company must end with “Private Limited” (Pvt.Ltd) as a suffix
Convert Proprietorship Firm to Pvt. Ltd Company in 3 Easy Steps
Step 01
Fill up the registration form
Select any package suits your requirement · Fill up the form which will take less than 10 minutes · Make payment through secure payment gateway. Step 02
BookMyTM is Here to Help
Your queries will be answered quickly and effectively · Provide details & upload documents required for Pvt. Ltd Company registration · Procurement of Digital Signatures (DSC) · Application for company name registration · Documents drafting including MOA and AOA Step 03
Your Private Limited Company is incorporated.
Certificate of Incorporation · Application for PAN and TAN All it takes 10 to 16 working days*.*Subjected to Government Processing Time.
The Process of Convert Proprietorship to Private Limited Company
- 1
Day 1 - 2
Collection of Information · Collection of required documents (Scanned copies) · Review of documents and information provided · Application for Digital Signature (DSC)
- 2
Day 3 - 7
Checking the availability of Name · Finalizing the name with the directors · Drafting MoA, AoA & Other required documents · Review and confirmation form directors
- 3
Day 8 - 10
Name Reservation under SPICe · Filing company registration application · DIN allotment application · Application for PAN and TAN of company
- 4
Day 11 - 13
Name reservation application under SPICe · Filing company registration application · DIN allotment application · Application for PAN and TAN of company
- 5
Day 14 - 16
Your Private Limited Company is incorporated. · *Subjected to Government Processing Time
Frequently Asked Questions
Converting a proprietorship to a private limited company offers limited liability protection, meaning personal assets are safeguarded against business liabilities. It enhances credibility with clients and investors, facilitates raising capital through equity, and ensures perpetual succession, allowing the business to continue despite changes in ownership or management.
Yes, registration is mandatory under the Companies Act, 2013. The conversion involves incorporating a new private limited company with the Ministry of Corporate Affairs (MCA) and transferring the proprietorship’s assets and liabilities to it.
Key documents include:Identity and address proofs of the proprietor and proposed directors/shareholders.PAN cards of directors and the proprietorship.Proof of registered office address for the new company.No Objection Certificate (NOC) from creditors, if applicable.A sale agreement for transferring the proprietorship’s business to the company.Digital Signature Certificate (DSC) and Director Identification Number (DIN) for directors.Memorandum and Articles of Association (MoA and AoA).
The conversion process typically takes 15-30 days, depending on document preparation, name approval by the MCA, and filing of incorporation forms like SPICe+ with the Registrar of Companies (RoC).
The business name can remain the same, subject to availability and compliance with MCA naming guidelines. The suffix “Private Limited” must be added to the name to reflect the new structure.
Assets and liabilities are transferred to the private limited company through a sale agreement. Proper valuation is required, and all debts or liabilities must be settled or accounted for during the transfer process.
The transfer of assets may attract capital gains tax, depending on the nature of the assets and compliance with Section 47(xiv) of the Income Tax Act, 1961. Consulting a tax professional is recommended to ensure tax-neutral conversion where possible.
No, licenses and permits cannot be directly transferred. They must be re-applied for under the new private limited company, following the procedures of the concerned authorities.
Yes, it’s advisable to inform clients, vendors, and stakeholders about the conversion to maintain transparency. Contracts, bank accounts, and business communications should be updated to reflect the new entity.
BookMyTM offers end-to-end support, including obtaining DSC and DIN, drafting the sale agreement, preparing MoA and AoA, filing MCA forms, and ensuring compliance with legal and tax requirements for a seamless conversion.
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