Proprietorship to Private Limited Company

Benefits of functioning as Private Limited Company has been mentioned in Incorporation of Private Limited company

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Requirements for Conversion of Proprietorship to Private Limited Company

  • Minimum 2 Shareholders
  • Minimum 2 Directors
  • All the assets and the liability of the proprietorship firm relating to the business become the assets and the liability of the company.
  • The shareholding of the sole proprietor in the private limited company is not less than 50% of the total voting power in the company.
  • His shareholding continues to remain so for a time period of 5 years from the date of the succession.
  • The sole proprietor does not receive any benefit or consideration, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company.
  • For converting an agreement has to be made between the sole proprietor and the Private Limited Company.
  • The MOA has to include a line that says – “Takeover of sole ownership concern”
  • DIN for all the directors
  • DSC for all the members-check

Required Documents

  • Copy of PAN Card of the Directors
  • Passport size photograph of Directors
  • Copy of Aadhaar Card/ Voter identity card
  • Copy of Rent agreement (If rented property)
  • Electricity/ Water bill (Business Place)
  • Copy of Property papers or NOC from owner

Procedure for Conversion

The guidance for conversion procedure has been given in Companies (Incorporation) Rules, 2014

  1. The proprietor must complete the slump sale formalities.
  2. The proprietor must apply for the availability of name in Form – 1.
  3. Prepare the MOA and Articles of Association (AOA) of the company specifying the objects and the rules of the company.
  4. Forms to be filled:
    • Form 1 must be filed with the MOA, AOA and other documents.
    • Form 18 specifies the details of the registered office.
    • Form 32 contains particulars of the information of the directors.
  5. Apply for the incorporation of the company to the Ministry of Corporate Affairs (MCA).
  6. Receive the Certificate of Incorporation.
  7. Apply for a new PAN and TAN.
  8. Change the bank information to reflect the conversion.