Convert Sole Proprietorship to Private Limited Company in India

A Proprietorship Company, famously known as a Sole Proprietorship company, is a type of business that a single person owns. Here, there is no legal distinction between the owner of the business and the business. The owner is in direct control of all aspects related to the business, is accountable for its functioning, and wholly owns its profits or losses.

A Private Limited Company, famously known as LTD, is a privately held company. In a Private Limited Company, the business limits owner liability to its shares and limits the number of shareholders to 50. It also restricts shareholders from trading shares publicly.

Advantages of converting a Proprietorship to a Private Limited Company

1. Liability limited to shares

Financial risks are a part of the business, but minimizing them and sustaining the business's progress is imperative. For example, in an LTD, the shareholders would not risk losing their personal assets if the company were to be closed for any reason.

2. No Takeover risks

The risk of takeovers is minimized when two shareholders trade shares, as the selling and buying of shares, are possible only when both parties have consented.

3. Perpetual Existence

Private limited companies are incorporated. Hence it continues to exist even if the owner dies.

4. Raising Capital

The Capital or options of raising business investment is not restricted to one person, which is the case in a Sole Proprietorship.

5. Tax Exemptions

Private limited companies pay corporate tax on their profits. However, dividends that the shareholders receive are not taxed. Instead, taxes are determined as per their income tax rate.

6. Large Enterprise

A Sole Proprietorship has difficulty reaching large-scale business standards, which is not the case in LTD. However, private limited companies can attract high-caliber employees that greatly help the company's growth.

7. Ease of Management

The burden of the operations and running of the business falls on one person in a Sole Proprietorship. Whereas in LTD, the company is much easier to manage.

Eligibility criteria to convert a Sole Proprietorship to a Private Limited Company in India

Before you convert your Sole Proprietorship into a Private Limited Company, you must ensure to fit the following criteria:

• A Private Limited Company can't be headed alone. Thus, you'd need to appoint another director
• You will need at least two shareholders
• You should have the consent of everyone you once held debt to as a Sole Proprietorship
• You must have up-to-date financial documents about your Sole Proprietorship

Documents required for converting a Sole Proprietorship to a Private Limited Company in India

While applying for proprietor conversion to a Private Limited Company, the following documents must be attached to it:

A written agreement between the sole Proprietorship and private limited company must be formed and sent to the Registrar of Companies

• Digital Signature Certificate (DSC) of all directors
• Director Identification Number (DIN) of all directors
• Altered Memorandum and Articles of Association (MOA/AOA)
• Form 32 – This form is to be filed whenever there is a change or update in a Board of directors.
• Form 18 – This contains the notice of the situation of the registered office of the proposed company.
• Form 1 – This form is to be filed to validate the name availability of the newly formed company.
• Letter of authority or Power of Attorney (POA)

Process for converting Sole Proprietorship to Private Limited Company in India

The process to convert a Sole proprietorship to a Pvt Ltd company is as follows:

1. Complete your slump sale formalities as a sole proprietor.
2. Appoint another director to head your upcoming private limited company.
3. Appoint the DIN and DSC for the said director and yourself
4. File the application to reserve the name of your private limited company using the RUN form.
5. Draft a Memorandum of Association to specify the object of your company and Articles of Association to specify the code of conduct your company promises to live by.
6. File the application for company incorporation.
7. Obtain the Certificate of Incorporation.
8. Get the PAN and TAN of your newly formed private limited company.
9. Make modifications to your bank details as per your new business entity.

Our Assistance in converting your Sole Proprietorship to a Private Limited Company

We at Registrationwala provide end-to-end solutions for conversion from a Sole Proprietorship to a Private Limited Company. Our services include:

• DIN, DSC & Name Approval
• Submission of Form
• Reviewing the application and making changes if needed
• Obtaining the Certificate of Incorporation
• Assisting you in obtaining PAN and TAN,
• Further Assistance with maintaining your books

Registrationwala.com is a leading legal consultancy firm providing comprehensive  Sole Proprietorship to Private Limited Company conversion services.

So, take your first steps towards this conversion and reach out to us.