Business Conversion

Fee Structure

Partnership to Private Limited
Total : 49890/- INR


CONVERSION OF PARTNERSHIP INTO PRIVATE COMPANY

Anyone can choose a Private Limited Company to build a scalable business. It’s the most famous legal structure for a business. The major benefit of registering a private limited company is that it gives a status of a separate legal entity that a partnership firm does not have. In the case of a partnership, a partner’s personal assets are attached and they would be held personally responsible for every debt or liability that the business incurs. Hence, with the expansion of business, if partners want to increase their credibility and put the limited liability on their members, it is more favourable for the partners to convert their partnership into a private limited company. Even though statutory compliance for a private limited company are higher than those of a partnership firm, it gives the company more opportunities to flourish and expand its reach. Conversion of a Partnership firm into a Private Limited Company is a good option for anyone who wishes to expand small and medium scale enterprises to a large scale one, or for infusion of equity capital.

The Advantages of Having a Private Company

A Private/Public limited company has many advantages over proprietorship and partnerships, as elaborated below.

  1. Limited Liability

 The first and foremost benefit of doing business via a company is the limited liability conferred upon the company's directors and shareholders. As a sole trader or partnership business, the personal assets of the proprietor or partners can be at risk in the event of a failure of the business, but this is not the case for a Company. Unfortunate events like business failures are not always under an entrepreneur’s control; hence it is pivotal to secure the personal assets of the businessman in the event of crises.

  1. Legal Entity/Status or Recognition

 A private limited company is a legal entity, a juristic person established under the Act. It has its existence separate from its directors and members. Private limited company status enables you to be taken more seriously than a proprietorship/partnership status does

 Operating as a private limited company often gives suppliers and customers a sense of confidence in a business. Larger organisations, in particular, will prefer in dealing with private limited companies than proprietorship/partnership organisations

  1. Perpetual Succession

 Another important characteristic of a private limited company is perpetual succession. It is a popular saying that the directors may come and go the members may come and go, but the existence of a company remains forever. A company once incorporated remains alive unless and until it is wound up by complying with the provisions of Law. The death, disability or retirement of any of its members does not affect the continuity of the company, irrespective of change in its membership

  1. Project Cost and Risk Factors

 For entrepreneurs going for hi-tech or high capital outlay projects, it is always advantageous to go in for a company form of organisation. Where the financial stake involved is high, it is found that banks and financial institutions while sanctioning financial assistance, insist on having a private limited company

  1. Easy Transferability

 Where it is proposed to sell the business as a going concern, all that is required is to transfer the entire shareholding to the purchaser and thus facilitate easy change in management and ownership. This will save time and money for the Promoters. A huge amount of stamp duty is saved.

  1. Dual Relationship

 In the company form of organisation, it is possible for a company to make a valid effective contract with any of its shareholders/directors. It is also possible for a person to be in control of a company and at the same time be in its employment. Thus, a person can at the same time be a shareholder, director, creditor and employee of the company. 

  1. Borrowing Capacity

 A company enjoys better avenues for borrowing of funds. It can issue debentures, secured as well as unsecured, accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to the company rather than partnership firms or proprietary concerns. A company enjoys better avenues for borrowing of funds.

  1. Taxation

 Sole traders and partnerships pay income tax. Companies pay corporation tax on their taxable profits. There is a wider range of allowances and tax-deductible costs that can be offset against a company's profits.

Requirements:

  1. Registered Partnership firm with minimum 2 or more Partners
  2. Minimum Share Capital shall be Rs. 100,000 (INR One Lac) for conversion into a Private Limited Company
  3. There must be a provision in the Partnership deed for converting the firm into Company
  4. There must be an agreement between the partners to convert the firm into Company.
  5. If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered
  6. Minimum 2 Shareholders and Directors. However, Directors and shareholders can be the same person.
  7. Director Identification Number (DIN) for all the Directors.
  8. Digital Signature Certificate (DSC) for two of the Directors.

Procedure of Conversion

  1. Hold a meeting of the members

Hold a meeting of all the partners of Partnership Firm and take assent for the conversion from its partners. Since the liability of the members of the firm is unlimited when a firm desires to register itself as a company as a limited company, the assent of the majority is required, not less than three-fourth of the partners should be present in person.

  1. Consent from secured creditors of the firm

Also Written consent or No Objection Certificate is to be obtained from the secured creditors of the firm if any.

  1. Obtaining the Name Approval in RUN for Proposed Company

 An application needs to be filed with the Registrar of Companies (ROC) to obtain the name for the proposed company after conversion, with various attachments stating the fact that the partnership firm is pro­posed to be converted under the Companies Act, 2013.

  1. Publishing the Advertisement in Two Newspaper (English Daily and Vernacular)

Pursuant to clause (b) of section 374 of the Act, firm seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration under the said Part, seeking objections, if any within twenty-one (21) clear days from the date of publication of notice and the said advertisement shall be in Form No. URC. 2, which shall be published in a newspaper, in English and in the principal vernacular language of the district in which office of such firm situated and should be circulated in that district.

  1. Affidavit

File an affidavit, duly notarised, from all the partners to provide that in the event of registration, necessary documents or papers shall be submitted to the authority with which the firm was earlier registered, for its dissolution as partnership firm consequent to its conversion into private limited company.

  1. Filing of necessary forms with ROC

Filing of necessary forms with ROC for the approval of conversion and for registration of firm into the Private Limited Company along with all the necessary attachments which specify the fact of conversion and also all the other basis charter documents like MOA, AOA, etc which are required in case of registration of the company under the Companies Act, 2013

Why White Code Legal? 

At White Code Legal we prioritize and always strive to deliver service as per client satisfaction. Keeping the focus on maintaining affordable prices and delivering excellence we aim to make worth every penny our clients spend with us and build a lasting relationship with them. 

Service Delivery Process followed by White Code Legal:

  1. The Client has to register themselves on our website.
  2. Once the Client is registered, we raise a Service Request.
  3. The Client receives a proforma invoice with an option to confirm and pay now or pay later.
  4. Once the Client confirms, our dedicated relationship manager liaisons with our experts and clients share a list of client information required to deliver the service.
  5. Once we receive the information, we take the required steps to deliver the service and the service request is closed.

Service Inclusions

  • Professional Fees

Service Exclusions

  • GST, Government Fee, and other Additional Taxes
 

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