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As a proprietorship grows it cannot get all the benefits of a corporation . There arises a need to convert the proprietorship into a private limited company. The conversion to private limited company may bring benefits like higher capital, limited liability, and many more. As per sec 2 (68) of the companies act 2013 , “private company” means a company having a minimum share paid up capital of one lakh rupees or such higher paid up capital as prescribed and which by its articles Restricts the right to transfer its shares Except to the cases of one person company, limits the number of its members to two hundred Benefits of private limited company Capital expansion: The private limited company has fundraising options and can raise higher capital for expansion whereas a sole proprietorship is limited to the capital of the owner Limited liability: In a sole proprietorship the liability for any losses is wholly of the proprietor and his/her personal assets also get attached to repay creditors in case of losses, whereas such liabilities are limited by shares or warranties in case of a private limited company Continuity: The private limited company is a separate legal entity and consequently it is not dependent on the existence of the owner whereas a sole proprietorship is dependent on a single person, so its existence is limited to that of the proprietor’s ability to operate The sole proprietor and company needs to enter into a takeover agreement or a sale agreement The object of the Memorandum of Association (MOA) be “The take over of a sole proprietorship”. All the assets and liabilities of the sole proprietorship shall be transferred to the company. The proprietor’s shareholdings should not be less than 50% of the voting power, and the same needs to be continued for a period of 5 years. The proprietor must not receive any additional benefits either directly or indirectly, except to the extent of shares held. Conditions for Conversion to private limited company
To Obtain Converted Pvt Ltd Company
- Obtain DIN and DSC
- Preparing MOA and AOA
- Apply the Form
- Apply for PAN and TAN and for bank account
Obtaining The Director Identification Number (DIN) and the Digital Signature Certificate (DSC) for all the directors.
The application by The proprietor for the availability of name in Form – 1. Preparing the MOA and AOA of the company specifying the objects and the rules of the company.
Applying for the incorporation of the company to the Ministry of Corporate Affairs (MCA) by submitting all the relevant documents.
Applying for a new PAN and TAN. Modifying the bank details as per the conversion
Documents Required for Convert Proprietorship To Pvt Ltd Company
Copy of the PAN Card of the Directors
Directors Passport size photograph
A Copy of Aadhaar Card/ Voter identity card
A Copy of Rent agreement(If rented property)
Electricity or Water bill (Business Place)
A Copy of the Property papers if property is owned
Landlord NOC
The forms that need to be submitted to the MCA are:
– Form 1 which must be filed with the MOA, AOA and other documents.
– Form 18 specifying the details of the registered office.
– Form 32 specifying detailed information of the directors.
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