Conversion of Proprietorship to Private Limited Company

Introduction

Conversion of Proprietorship to Company or Private Limited Company can be a good step in order to open doors for capital extension. There are certain benefits one can get after converting their Sole Proprietorship to Company such as limited liability, continuity, etc. There are certain documents that need to be prepared before starting the Procedure of conversion of Sole Proprietorship to Private Limited Company. In this article, you’ll get complete detail related to the list of documents required for the conversion of Sole Proprietorship to Company, Steps to convert your Proprietorship to company, benefits, conditions for conversion, etc.

Conditions for Conversion

There are some conditions which need to be completed for the conversion of Proprietorship to Private Limited Company. These conditions are as follow:

• MoA must include the take over of the sole proprietorship.
• Takeover Agreement or Sale Agreement is required to be updated between Company and Proprietorship.
• The voting of shareholding of proprietorship should not be less than 50%.
• Sole Proprietorship’s assets and liabilities must be transferred to the company.

Documents Required for Conversion

In order to convert a Sole Proprietorship to Private Limited Company, certain documents are required. These documents are as follow:

• All Director’s Identity Proof Copy is required it can be a Aadhaar Card or PAN Card
• Address Proof such as Voters ID or Utility Bill is needed
• All Directors Passport Size Photograph is required
• Proof of Ownership for Company Place if owned or in case of rented property, Rental Agreement is needed.
• NOC (No Objection Certificate) by Landlord is required
• However, there are some forms that need to be filled. They are SPICe+ Part A, Part B, e-MoA & e-AoA, aGILE, INC-9 & Form DIR-2 for Directors Information.

Process of Conversion of Proprietorship to Private Limited Company

The Process of Conversion of Sole Proprietorship into Private Limited Company includes certain steps. They are as follow:

• Step 01: Complete Formalities: The first step includes to complete the slump sale formalities.
• Step 02: Obtain DIN & DSC: After completing the formalities obtain Directors Identification Number and Digital Signature Certificate of all Directors.
• Step 03: Name Reservation: Once you obtain DIN & DSC, search and apply for a unique name for your company by using FORM SPICe+ Part A.
• Step 04: Prepare MoA & AoA: Once you get name approval for you private limited company, prepare your MoA (Memorandum of Association) & AoA (Article of Association)
• Step 05: File Incorporation Form: After the preparation of MoA & AoA, file the incorporation form of the company to the MCA (Ministry of Corporate Affairs).
• Step 06: Incorporation Certificate: Once you submit all the necessary documents & application, you’ll get your Company Incorporation Certificate in a few days.

Benefits of Conversion

Following are the benefits of Conversion of Sole Proprietorship into Private Limited Company:

1. Limited Liability: The Proprietor in Sole Proprietorship business is self responsible for all the losses and gains and they need to repay the debt or loan through their own personal assets. While Private Limited Company offers limited Liability depending on the shares or Warranty.
2. Capital Expansion: Private Limited Company offers the opportunity of raising funds while in Sole Proprietorship business the capital is limited to the capital of the owner.
3. Continuity: A Sole Proprietorship business is run by a single individual and thus its life depends on the proprietor’s availability while Private Limited Company is a separate legal entity and it is not dependent on a single owner.

Key Consideration to Start Private Limited Company

In order to convert or start a Private Limited Company, there are certain points which need to be kept in mind. They are as follow:

• Minimum two Directors are required to start a private limited company in which one of them can be a proprietor and other one can be his/her friend or relative.
• All the directors must have DIN i.e, Director Identification Number.
• To start a Private Limited Company, there is no minimum authorised capital required, however it is recommended for a business to have sufficient capital.
• There should be a minimum of two shareholders required to start a private limited company. The directors themselves can be the shareholders but the sole proprietor must be one of the shareholders.

Why Bizfoc?

Bizfoc is one of the trustworthy business partners. They offer easy conversion from sole proprietorship to Private Limited Company. They handle complete procedures from documentation to compliances. They have a team of experts with multiple years of experience in this field. They offer complete service at a minimal cost.

Conclusion

The procedure of conversion of Sole Proprietorship to Private Limited Company includes multiple documents and other requirements such as two directors and shareholders. There are multiple benefits as well by converting a proprietorship to a company such as limited liability, chance of capital extension, continuity, etc. To convert the Sole Proprietorship to Private Limited Company certain conditions to be met. The process of conversion includes multiple steps, it is advised to take the guidance from experts for easy conversion.

Frequently Asked Questions