How to convert a Proprietorship into Private Limited?
People commence their businesses as a sole proprietor because of fewer regulations, but as the business grows, a sole proprietor requires a separate bank account to handle all of its business transactions; the immediate possible solution is to turn the business into a private company.
The incorporation of a private company shall be carried out in accordance with the procedure given and shall include:
- Apply for Digital Signature Certificate and Director Identification Number of applicant
- Filing of the name approval form with Registrar of Companies(ROC)
- Filing of the incorporation form with ROC
- Applying for separate PAN of the company
What are the requirements for Conversion?
Provisions or conditions that are required to be fulfilled during conversion of proprietorship into private limited are as follows:
- The sole proprietor shall become one of the directors of the private company with no less than 50% of the total voting power.
- The minimum share capital of the private company will be INR 1,00,000/-.
- In the case of a private company, the minimum number of directors will be two.
- DIN will be distributed to private company directors.
- All the financial assets and liabilities of the proprietorship will turn into assets and liabilities of the private limited company.
- The newly incorporated private company is required to have "Takeover of sole proprietorship concern" as one of the objects in their Memorandum of Association (MOA).
The time taken for conversion shall be 15-20 days and shall also depend on the documents provided by the applicant and on the speed with which the government approves them.