Conversion of Sole proprietor to Pvt. ltd. Co.

The reason to incorporate Private Limited Company is to grow your business and save the goodwill of the business.

A company can be registered with the name of the existing sole proprietorship but once a company registered no business model can open a business with the same name. If somebody does, then company's director can file a suit against them.

Advantages of Pvt Ltd Co. over Sole Proprietorship

Separate Legal Entity
A company is a separate legal entity having distinct entity from its members, as compared to sole proprietorship where there is no separate Legal Entity.

Perpetual Succession
A Company existence is not affected by the death, lunacy or bankruptcy of its members whereas in case of proprietorship concern the business comes to end after death of Proprietor.

Own Assets in its name
A company, being a legal person, is very much capable of owning, enjoying and disposing of property in its own name whereas in case of sole Proprietorship all assets are in the name of Proprietor unless the firm is having any legal or tax registration.

Limited Liability
In case of a company, liability of the members of the company is limited upto the value of the shares subscribed by each of them whereas in proprietorship concern the proprietor is personally liable.

Popular to raise funds
It is easier to raise funds in case of company and attract investments and foreign funding. Funds through loans can also be easily arranged without any complications, whereas very limited funds can be raised through sole Proprietorship.

Pre-requisites to be followed before conversion Process

All the assets or liabilities of the old sole proprietorship firm will become the assets of the new private limited company immediately basis.

The shareholding of the old proprietor must be at least 50% in the new private limited company or you can say min 50% voting rights power. Even after the incorporation of new company old proprietor have to hold the shareholding at least for the 5 years.

The old sole proprietor not received any benefits or consideration from the new company directly or indirectly other than share allotment because it’s not treated as sale of the old proprietorship firm.

Conversion Process

Obtain the DSC and DIN for the proposed directors.

Get permission to use the name of the company as same as the sole Proprietorship.

Apply for Company incorporation to the MCA.

Prepare MOA & AOA of the company where new private limited company rules are mentioned with the objective of transfer the proprietorship firm into the company.

Complete all the formalities still left of the Sole Proprietorship.

Apply for the fresh PAN & TAN Number of the company.

By passing required resolutions the assets and liabilities along with the contracts of sole proprietary concern can be transferred to Private Limited Company.

Takeover of Assets and Liabilities Process

Since, existing Sole Proprietorship business must be closed within 3 months of incorporating new Private Limited Company, the transfer of these items will have to be seen to promptly.

Closure of Bank Account and Opening of New Bank Account
All bank accounts used for the sole-proprietorship/LLP need to be closed, and a new bank account(s) under the Private Limited Company need to be opened.

Assets and Liabilities
Net assets of the Sole Proprietorship that are assumed by the Private Limited Company can be converted into paid up capital for the Private Limited Company, via the making of resolution and further contracts/agreements. Any debt owing to any creditors (including government authorities by way of summonses/fined/penalties) will have to be settled before the transfer of such assets.

Contracts, Services Agreements, Leases
The contracts/services agreements/leases signed under the proprietorship business will have to be transferred in the name of the new entity.

Other Licenses and Permits
New licences/permits are not transferable in most cases, therefore need to be re-applied from government authority issuing the licences/permits.

Documents Required for Conversion

Self attested copies of PAN Card of all the directors

Self attested copies of Adhaar Card of all the directors.

Self attested Passport/ Voter Identify Card / Driving License. (Identity Proof for DIN)

Self attested Bank statement/ Electricity Bill/ Telephone Bill/ Mobile Bill (Address Proof for DIN)

Passport size photographs of all the directors

Mobile No. and E-Mail id of all the directors

Copy of Utility Bill Eg- Landline Bill or Electricity Bill where the registered office of the company is to be situated (Shall not ne older than 2 Months)

In case of rented premises- Rent Agreement + Electricity Bill + NOC

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Frequently Asked Questions

For conversion of Proprietor to Private Limited do I have to be present in person?

The entire procedure is 100% online and you don’t have to be present at our office or any other office for closure of proprietorship & incorporation of private limited. A scanned copy of documents has to be sent via mail.

What is the time taken in conversion of Proprietorship into Private Limited Company?

Filingwale can convert proprietorship into private limited company typically in 14-20 days. The time taken also depends on relevant documents provided by the applicant and speed of approvals from government. To ensure speedy registration, please pick a unique name for the proposed Company and make sure you have all the required documents ready, prior to starting the registration process.

Can NRI/ Foreign Nationals become Director in Private Limited Company?

Yes, an NRI or Foreign National can become a Director in a Private Limited Company on acquiring DIN. However, at least one Director on the Board of Directors must be a Resident of India.

Who can be a member of Private Limited Company?

Any individual/organization can become the member of the private limited company including foreigners/NRI.

Are there any other Payments to be made for incorporation certificate of Private Limited in addition to the fees paid at the time of conversion?

There is absolutely no other payment. We will send you an invoice that is all-inclusive, with no hidden charges.