CONVERSION OF SOLE PROPRIETORSHIP TO PRIVATE LIMITED COMPANY

No doubt that there are many benefits in converting a proprietorship into a private limited company back it also causes diffusion of power and loss of independence. Many conditions need to be fulfilled to convert proprietorship to a private limited company. The sole proprietor and the company must enter into a sale agreement or a takeover agreement. There should be a memorandum of Association that states the object of taking over the sole proprietorship. The transfer of all the assets and liabilities of the sole proprietorship to the company must be conducted. The voting power of the shareholding of the proprietor should not be less than 50%, and the power should continue to be vested upon them for 5 years. Except for the extent of share that is held by the proprietor, he does not receive any additional benefits be it directly or indirectly.

When converting a sole proprietorship to a private limited company one should first form the private limited company and then take over the sole proprietorship through a memorandum of Association. After taking over the sole proprietorship through a memorandum of Association one needs to transfer all the benefits and liabilities to the limited company. To obtain the certificate of incorporation some requirements need to be fulfilled and the requirements are concerning directors, director identification number, shareholders, and capital. A private limited company should have a minimum of 2 directors and a proprietor himself can be one of the directors and he can ask any other relative, Friend, or any other trustworthy person to become another director. These directors must have an identification number. A private limited company will lead shareholders and directors can also be shareholders. Another one of the most important requisites is capital and a private limited company should have a minimum capital of rupees 1,00,000.

Procedures and steps involved in the conversion of proprietorship to the private limited company; There are slum sale formalities that need to be completed by the proprietor. The director should have the director identification number and the digital signature certificate, these are must for the conversion. Form- 1 Must be filled by the proprietor. Memorandum of Association and Article of Association of the company and the objects must be specified in it, must be prepared. The proprietor must apply to the ministry of corporate affairs for the incorporation of the private limited company. All the relevant documents must be submitted. After submission, they should receive the certificate of incorporation. A new pan and tan must be obtained. For conversion, the proprietor must modify all the bank details.

The relevant documents that are required for the conversion such as PAN card copy of all the directors, this Work as identification proof. Documents also required address proof and for this, a copy of Aadhar card or voter ID would suffice. If the proprietor owns the business place in the proof of ownership of the business places required, or if the place is rented then the rental agreement is required. The document should have passport size photos of all the directors. There should be a NOC (No objection certificate) of the landlord in the document. Any bills such as electricity bills or water bills also need to be attached in documents.

3 forms need to be filled and submitted to the ministry of corporate affairs, those are Form 1, Form 18, Form 32. A memorandum of association, article of Association, and some other relevant documents must be submitted with Form 1, Form 18 should have details of the registered office, and Form 32 should have the details and information of the directors.

When all the necessary procedures are completed, then the ministry of corporate affairs approves it, and ROC grants the certificate of incorporation, and this certificate provides for Date of incorporation, company identification number, a permanent account number is mentioned with the seal of the registrar.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.