Conversion of Sole Proprietorship to a Private Limited Company in India

If you are planning to convert your Sole Proprietorship to a Private Limited Company in India, here you will find the advantages, procedure, eligibility and other relevant details

It is seen that most people prefer a sole proprietorship as their business structure in the initial stages of the venture because of its hassle free nature and minimal compliance requirements. However, as the business grows in size, steps have to be taken in order to reduce the liabilities and workload on one single person. The most hassle free solution in such a situation is the conversion from a Proprietorship to a Private Limited Company.

The promoters of the company should get involved in an agreement made for selling the business at the time of conversion of the sole proprietorship to a private limited company. Also, the conversion has to have ‘the takeover of a Sole Proprietorship Concern’ clearly mentioned as one of the objectives in the MoA.

Reasons why should convert from Sole Proprietorship to Private Limited Company in India

• Independent Legal Entity – A Private Limited Company is a legal entity that is independent of its members. This means that the firm can have its own assets. The private limited company can have separate contracts and even sue a third party in case there is a confusion.
• Directors have Limited Liability – The personal assets of the directors of a private limited company are untouched in a situation of crisis and debts of the company in case of a Private Limited Company. The only funds that can be used to pay off dues are either the money that is invested for the incorporation or the company’s assets.
• Business ownership can be transferred with ease – Unlike Proprietorship, the business ownership can be transferred with greater ease to another company or an individual when the company is a private limited company with mutual consent of all the stakeholders.
• Continuous Existence – Because of its independent legal nature, a Private Limited Company can have continuous perpetual succession. It remains unaffected by deaths of any member or change in membership, unlike the Sole Proprietorship.

Eligibility Criteria for Conversion of Sole Proprietorship to Private Limited Company in India

• At least two or more directors for the company.
• No minimum amount required as capital.
• Government fee has to be paid to the government for issuing a minimum of shares worth rupees one lakh during the registration of the company.

List of Required Documents for Conversion of Sole Proprietorship to Private Limited Company in India

• PAN Card of all the directors and shareholders.
• Passport ( in case of foreign nationals and NRIs)
• Aadhar Card, Voter ID, of all the directors and shareholders.
• Passport size photos of all the directors and shareholders (latest)
• Electricity/Water Bill of the registered place of business.
• NOC from the landlord of registered place of business (in case of rented property)
• Rent Agreement of registered place of business (in case of rented property)
• Income tax return acknowledgment (to be submitted by the sole proprietor)

Procedure for Conversion of Sole Proprietorship to Private Limited Company in India with Seedup.in

• Fill the forms – The first step requires you to fill out the questionnaires and submit the required documents.
• Application for DSC – The next step is to apply for the Digital Signature Certificates of all the directors.
• Reservation for Name – The next step is checking for the availability of the name and then reserving it under RUN.
• Drafting of MoA, AoA – The next step is drafting of the MoA, AoA and a few other documents. After that, the stamp duty is paid and all the documents are notarized.
• Application for Company Registration – The next step is to file an application for the private Limited Company registration. After that, applications for DIN, TAN and PAN for the company have to be filed.

This entire procedure will take around 12-15 working days with Seeup.in’s assistance.