In many cases, small business owners continue to run their businesses as sole proprietorships due to the lower compliance requirements that are associated with this type of business. The importance of separating the sole proprietor’s accounts from the tax filings of the business begins as soon as the business grows and spreads, so as soon as possible is paramount. Currently, we are in the process of converting the company into a private limited company and it is the perfect time for that to be done.
It is only after the execution of an agreement between a sole proprietorship and a private limited company (once it has been incorporated) regarding the sale of the business that can proprietorship be converted to private limited company. In addition, as an objective of such a Private Limited Company, it shall mention in its Memorandum of Association the following line: “the acquisition of a sole proprietorship concern”.
The Advantages Are as Follows
Existence as a Separate Legal Entity
After an entity has been registered in the eye of the law, it is legally separate from its owners, directors, managers, shareholders, and employees, which means that it is a separate legal entity.
An Organization With Limited Liability
The liability of the company is limited to the amount of its share capital or the guarantee provided by the Company as it is a separate legal entity. The Company’s obligations do not create a right over the personal assets of the owner.
Raising Funds
The company is also one of the most preferred entities by investors as it provides the opportunity for a company to raise money through banks, foreign investors, venture capitalists, angel investors, etc.
Existence in Perpetuity
In the absence of winding up by the promoters or the government, a company has a perpetual existence once it is registered.
The Minimum Requirements Are as Follows
- The minimum number of directors is two, and the maximum number is fifteen
- A minimum of two shareholders is required
- There must be an Indian director
- Signatures of subscribers and directors in digital format
- There is no requirement for minimum capital.
- If available, provide the Director Identification Number.
Documents Required to Convert a Proprietorship Firm to a Limited Liability Company
- The PAN cards of the proposed company’s members and directors
- Foreign nationals must submit their passports when applying for immigration; proof of identity to be presented by all the members and directors of the proposed company (Aadhar/Voter ID/Driving License/Passport)
- It is required that the members and directors provide proof of their address (utility bill, telephone bill, mobile bill, bank statement) that is not older than two months.
- Members and Directors should provide a passport-sized photograph of themselves;
- The owner of the property must provide the following proof: (Copy of the registration and the latest electricity or water bill of the government)
- There is a requirement to send proof that the business address has been rented or leased: (Rent Agreement, NOC from the owner, Newest Govt. Electricity or Water Bill)
An Overview of the Process of Converting a Proprietorship Company to a Limited Company
- Fill out the application form
The first step is to complete the simple questionnaire.
- Processing of documents
In the second step, we will be asking you to provide a questionnaire filled out by you so that we can arrange the documents in accordance with the requirements we can proceed with the processing of the documents.
- The DSC application
The Digital Signature Certificate (DSC) is comprised of the type of E-signatures you have prepared. It usually takes one day to prepare the certificate.
- Availability of names
As the next step, it is important to confirm whether the name is available for use. The name must be unique in nature and should not be similar to that of any other entity that is registered.
- The incorporation of a company by e-filing
Upon the name being approved by the ROC, an application will have to be submitted online through SPICE+ along with the requisites documents provided by the client. The MOA and AOA will also have to be filed online.
- Obtain the Certificate of Incorporation
Our team will provide all the documents that the Company needs to incorporate such as the private limited company registration certificate, MOA, AOA, and Digital Signatures, as soon as the Company is incorporated.
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