Conversion of Proprietorship to Private Limited Company

LLP or Limited Liability Partnership is a partnership (generally in a business) in which all the members (partners) have limited liabilities. Generally, an LLP is set up under legal terms and documents. There is a defined procedure as to how you can register your LLP. There are certain benefits to be in an LLP but like everything, it has its own disadvantages too. Sometimes, it so happens that people are confused as to how to get your LLP registered, however, most of them don’t even know that there is a defined procedure as to how you can close an LLP. Described below, to remove such misconceptions is a procedure with which you can close LLP in India. Starting a business as a Sole Proprietorship is a common practice by most of the people due to low compliance requirements. But with the increase in business and growth in income, there is a need to separate the bank accounts and the tax filings of the Sole Proprietor and that of the business. To accomplish this separation a possible solution is to convert the Sole Proprietorship into a Private Limited Company as it offers various benefits over proprietorship like limited liability, ability to attract equity capital, continued existence, etc.

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

Ways to close LLP

  • 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.

Our Company Registration package includes the following:

  • DSC for one director and DIN for up to three directors
  • Drafting of MoA & AoA
  • Registration fees and stamp duty
  • Company Incorporation Certificate
Benefits Of Converting into Private Limited Company
  • NO MINIMUM CAPITAL

    No requirement of minimum paid-up capital required for starting a Private Limited Company.

  • EASE OF FORMATION

    A Private Limited Company can be easily registered and is easy to manage and run with less legal compliance's.

  • BUILD A GREAT TEAM

    Today, in the business world it is important to have the option of providing stock ownership or ESOPs to employees which can be offered only by Limited companies.

  • SEPARATE LEGAL ENTITY

    The biggest advantage of a Private Limited Company is that its identity is distinct from that of its members which ultimately limits the liability of members. A company is a separate person having its rights & Obligations enabling it to enter into contracts in its name, right to sue & be sued.

  • PERPETUAL SUCCESSION

    In case of the death of the owner or transfer of shares, your business won’t get affected as the company is considered as separate from its members.

  • LIMITED LIABILITY

    The greatest benefit of Private Limited Company is a limited liability. If any liability arises then its member’s assets remain unaffected; members are only liable for unpaid shares held by them and not more than that. Stakeholders are not liable for corporate debts and liabilities.

  • GREATER FLEXIBILITY

    A Private Limited Company is required to perform lesser legal formalities as compared to a Public Limited Company. It enjoys special exemptions and privileges under the company law. Therefore, in Private Limited Company, less number of compliance is required.

  • SECRECY

    A Private Limited Company is required to perform lesser legal formalities as compared to a Public Limited Company. It enjoys special exemptions and privileges under the company law. Therefore, in Private Limited Company, less number of compliance is required.

  • ATTRACT INVESTMENT

    Private limited companies easily accommodate equity funding as there is a clear distinction between shareholders and directors as well as limited liability. Venture capitalists and private equity funds prefer to invest in this structure.

  • TRANSPARENCY & CREDIBILITY

    Private Limited Company enjoys enhanced transparency as the information relating to a company is available in a publicly searchable database. Thus, able to win the trust of the general public & improve business credibility.

  • EXIT PLAN

    It offers the best type of exit plan for all promoters. Only the shares of a company can be sold or transferred to another entity without any hassles, while the business remains a going concern.

  • GOING INTERNATIONAL

    A private limited company allows FDI up to 100% through automatic route without any prior government approval.

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Starting a Business

Many founders are confused about what kind of entity to register when they start their business. Should it be a private limited company, limited liability partnership, partnership firm, one person company or a sole proprietorship. Each of these has very specific advantages and disadvantages. There is no one type for all businesses. A private limited company registration, for example, would be a good fit for any venture that will look for funding at a later stage. You can contact TaxFillingIndia for all the advice you need. We assure you of great service at a reasonable price. You can find a company name availability here.

Intellectual Property

In modern business, there is no other asset as valuable as intellectual property, and yet so many startups end up neglecting it. But this is surely not advisable, as trademarks, copyrights and patents ensure that you have sole rights to your creation, be it your brand, your designs or your inventions. At TaxFillingIndia, we are well equipped to handle all your IP requirements. We facilitate trademark applications in just three days, copyright registration for all your software, pictures, audio and video content, and can connect you to patent attorneys to conduct a patent search and file your patent applications. You can find a Trademark availability here.

Government Registrations

In India, you need a license for everything in business. Started a manufacturing business? You need a GST Registration and a Trade License. For a food business, you need an FSSAI license. Have employees? You need a Professional Tax registration and Shops & Establishments Act Registration. If that's not enough, you also need to file GST Returns and Professional Tax Returns.

Legal Documentation

The worst way to approach business is to just get into new partnerships and arenas without examining consequences. By getting a lawyer to draft contracts or agreements with new vendors, employees and investors, you're ensuring that you have all the downsides covered. At TaxFillingIndia, we connect you to lawyers who will deliver complex documents, from shareholders' agreements and founders' agreements to terms of service/privacy policy and non-disclosure agreements, at a reasonable cost in a few days' time. Well-known startups, such as Holachef and Big Basket, have chosen to connect with a lawyer through us for their documentation work.

Mandatory Compliance

It's not enough to have started a private limited company or an LLP. You need to comply with all the requirements of the Ministry of Corporate Affairs and Income Tax Act once you do. You need to inform them of every relevant change you make, whether it is adding a director, removing a partner or increasing authorised share capital. You also need to file annual returns and maintain your accounts. In the case of a private limited company, you even need them audited. At TaxFillingIndia, we facilitate all these services completely online. Which means you can engage a professional on retainer for the year and we'll ensure that all the formalities are completed for you while you focus on your business.

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