How to convert my Proprietorship to Private Limited Company [Easiest way] image.png

How to Convert my Proprietorship to Private Limited Company [Easiest way]?

How to Convert my Proprietorship to Private Limited Company [Easiest way] ?

Small business houses which are sole proprietorships often convert to private limited companies to spread their business and increase profits. Conversion to a private limited company is quite simple although it increases a number of mandatory compliances which are strictly required by Companies Act, 2013. The process of conversion of sole proprietorship to private limited company is called corporatization. In order to Convert my Proprietorship to Private Limited Company, a person needs to have the following:

  • A license under  Shop Act or other relevant law.
  • ₹1 lac. This is the minimum share capital required to incorporate a private limited company.
  • Minimum 2 directors are required. Shareholders and directors can be the same.
  • Digital Signature Certificate (DSC) for a director.
  • Director Identification Number (DIN) for all directors.

Conversion process

  • The first step is to obtain a DSC.
  • Get approved DINs because it is important for incorporation of the company.
  • Search names for your company, at least 6 of them.
  • Submit an application with the Registrar of Companies (ROC) for availability of names. Submit 6 names of the proposed company for deliberation. You are also required to submit the Main Object Clause that specifically depicts the business company will be involved in.
  • Make representation at ROC. Either the promoters need to be present or their representatives.
  • Submit Memorandum of Association (MOA) and Articles of Association (AOA) with ROC along with Forms 1, 18 and 32 and letter of authority.
  • File all the other necessary documents with ROC. The Registrar will then issue Certificate of Incorporation (COI).

Your private limited company is now formed and ready to perform.

Register a Private Limited Company in India image

Advantages of conversion

A company enjoys various benefits like limited liability, transfer of shares, perpetual succession, easy access to funds, better availability of resources, tax benefits etc. When it comes to starting a private limited company, it is better to convert the existing sole proprietorship as it has certain benefits, viz.

  • Capital gain tax is not charged on transfer of assets.
  • Brand value continues because of the old name.
  • Absorb unabsorbed depreciation.
  • Can carry forward and set off losses.
  • All the assets and liabilities transfer directly.

Here is the complete Procedure for registering a private limited company, alongwith expenditure involved and list of documents required.

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