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Sole Proprietorship to Private Limited

Home Business Conversions Sole Proprietorship to Private Limited

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    Sole Proprietorship to Private Limited

    The sole proprietorship cannot receive all the benefits of the operation as it grows. There will therefore be a need to convert the company into a private limited company. The conversion can lead to all the benefits of a company, such as higher capital, limited liability, and so on.

     

    As the business grows, the demands of the business and the drawbacks of the firm could force the entrepreneur to start the process of converting the business into a private limited company. A private limited company offers significant advantages over the form of ownership of a business, including limited liability, the ability to attract capital, continued existence and more. In this article, we look at the requirement and procedure for converting a company into a private limited company.

    The conversion of a company into a private limited company has many advantages, but it also brings with it the spread of power and the loss of independence. It is therefore necessary to take a decision after careful consideration of all the factors involved and to see whether it really gives rise to the intended privileges.

    Following are some requirements to be kept in mind while converting proprietorship into a private limited company:

    • To convert a Sole Proprietorship into a Private Limited Company, an agreement has to be executed between the Proprietorship and the Private Limited Company (once it is incorporated) for the sale of the business. To convert a Sole Proprietorship into a Private Limited Company, an agreement has to be executed between the Proprietorship and the Private Limited Company (once it is incorporated) for the sale of the business.
    • Further, such Private Limited Company so incorporated must have “the takeover of a Sole Proprietorship Concern” as one of the objectives in its Memorandum of Association.
    • Transfer of all assets & liabilities to the private limited company.
    • The sole proprietor as a member of the board of directors with at least 50% voting power.
    • No benefit direct or indirect to sole proprietor other than by way of allotment of shares.
    • Minimum 2 shareholders & 2 directors for private limited company.
    • DIN for all directors.

    Registration Process

    Step 1: Obtaining DSC and DIN:

    Digital Signature Certificate(DSC) and Director Identification Number(DIN) is required for the proposed Directors of the Private Limited Company which is necessary to file the company registration documents. For this, you will only need to provide a few scanned documents and details; our representatives will fill out the form and submit it online. DIN and DSC can be obtained for the proposed Directors within 1 to 2 days.

    Step 2: Name Approval:

    A minimum of one and a maximum of six proposed names must be submitted to the MCA. Subject to availability, naming guidelines and MCA processing time, Name Approval can be obtained in 2 to 3 working days.

    Step 3: Drafting MOA and AOA Electronically:

    It takes 2 to 3 days to draft MOA and AOA Electronically in Spice MOA (INC-33) and Spice AOA (INC-34).

    Step 4: Company Registration:

    After drafting the e-MOA and e-AOA, the incorporation Spice Form INC-32 is submitted along with a link form Spice MOA (INC-33) and Spice AOA (INC-34) to the MCA. MCA will usually approve the application for incorporation in 5 to 7 days, subject to their processing time. Please note that forms 49A and 49B have to be mandatorily applied with SPICe. If the same is not filed within 2 days of submitting SPICe (INC-32), the application for incorporation will be marked as ‘Invalid’.

    Required Documents

    • For Directors & Shareholders: Self Attested PAN Card copy
    • Self Attested copy of any one of the Identity Proof(Voter’s ID/Passport/Driver’s License)
    • Self Attested copy of Address Proof in the name of the director (Any utility bill i.e., mobile bill/water bill/ electricity bill, or bank statement which should not be older than two months)

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