Convert Proprietorship to Private Limited Company

Conversion from Proprietorship to Private Limited Company

Initially, numerous enterprises opt for a sole proprietorship model because of its low requirements for compliance. Nevertheless, when the business grows, it becomes crucial to alleviate the compliance burden on a single person and restrict liabilities. In such circumstances, transforming the proprietorship into a private limited company is the most appropriate alternative. To carry out this conversion, the company's promoters must execute a business sale agreement. Moreover, the Private Limited Company's Memorandum of Association must explicitly mention the intention of "acquiring a Sole Proprietorship Concern."

Benefits of conversion from Sole Proprietorship to Private Limited Company

Separate Legal Existence

A private limited company is an independent legal entity, distinct from its members, which enables it to own assets, enter into contracts, and take legal action in its own name, including filing lawsuits against third parties. The company's shareholders and directors are not personally liable for the company's debts to its creditors beyond their shareholding in the company.

Limited Liability of Directors

In a private limited company, the director's personal assets are not affected if the company has outstanding debts. Only the funds invested in the incorporation of the company or the assets owned by the company can be liquidated to settle any outstanding obligations.

Easy Transferability

Ownership of a business can be transferred to an individual or another company by transferring the shares, subject to the consent of the shareholders. This process is much simpler compared to proprietorship, where such transfers are not permitted.

Uninterrupted existence

A private limited company is a distinct legal entity, which means it has perpetual succession. This means that it is not affected by the death or departure of any of its members, unlike a sole proprietorship. The company remains in existence regardless of any changes in its membership.

Documents required for conversion to a Private Company


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PAN Card

PAN Card of directors and shareholders Foreign nationals may provide passport

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Address Proof

Aadhar Card and Voter ID/ Passport/ Driving License of all directors and share holders

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Photograph

Latest Passport size photograph of all directors and shareholders

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Business Address Proof

Latest Electricity Bill/ Telephone Bill of the registered office address

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NOC from owner

No Objection Certificate to be obtained from the owner of registered office

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Rent Agreement

Rent Agreement of the registered office should be provided, if any

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Income Tax Returns Acknowledgement

the sole proprietor needs to submit an income tax return acknowledgment.

Convert Proprietorship Firm into private ltd. company in 3 Easy Steps

1. Answer Quick Questions
  • It takes less than 10 minutes to fill in our questionnaire
  • Provide basic details & documents required for registration
  • Make payment through secured payment gateways
2. Experts are Here to Help
  • Assigned Relationship Manager
  • Procurement of Digital Signatures (DSC)
  • Application for Name Reservation
  • Drafting Documents including MOA and AOA
  • Certificate of Incorporation
3.Your Private Limited Company is Registered
  • All it takes is 12-15 working days*
*Subject to Government processing time

Process of conversion of proprietorship to Pvt. Ltd.

Day 1
  • Application for Digital Signature Certificate
Day 2 - 4
  • Checking Name availability
  • Application for Name Reservation under “RUN”
  • Reservation of Name
Day 5 - 8
  • Drafting of MoA, AoA & other documents
  • Payment of Stamp Duty
  • Notarisation of required documents
Day 9 - 10
  • Filing application for company registration
  • Application for DIN Allotment
  • Application for PAN and TAN of company
Day 11 - 15
  • Government processing time

Explore conversion of sole proprietorship to Private Company in India

Frequently Asked Questions


A Pvt. Ltd. company would need two or more members who shall act for as directors of the said company. It is a general practice that the shareholders of the company play the role of directors. It does not require any minimum amount to be infused as capital. However, a certain fee must be paid to the Government for issuing a minimum of shares worth ₹ 1 lakh [Authorized Share Capital] during company registration. Also, there is no requirement to show proof of capital invested during the registration process.

Starting a business under the Pvt. Ltd structure is advantageous as it creates trust and credibility. Its easier to get loans, and it helps in attracting more financial institutions, suppliers and potential clients. financial institutions and individuals prefer investing in companies that are reliable and private limited companies offer such a reliability factor, as compared to a structure like a sole proprietorship or general partnership. Therefore if you are looking for expanding or trustworthiness is an important part of business its a very good option

Once a Company is incorporated, it will be active and in existence as long as the annual compliances are met regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. A struck-off Company can be revived for a period of up to 20 years.

The company must hold a Board Meeting at least once in every 3 months. In addition to the Board Meetings, an Annual General Meeting (AGM) must be conducted at least once every year. Fulfillment of Annual Compliance Requirements is a must to maintain the active status of the company.

Ministry has introduced a new form “RUN” (Reserve Unique Name) for company name registration on its portal. Under “RUN”, the applicant can make application by providing 2 different names with its significance. The names should be unique and in accordance with the provisions.

All the assets and liabilities of the sole proprietary concern relating to the business are considered to be purchased by the newly formed company. This makes the sole proprietor liable to pay taxes for any capital gains calculated on such transfer. However, there is a provision under section 47(xiv) of the Income Tax Act, which lays down certain conditions for exemption from any capital gains i.e.; if they are transferred immediately before the succession, it becomes the assets and liabilities of the company.

Any person is eligible to be a shareholder while registration or afterwards. A Body Corporate such as company or LLP; and Association of Persons (AOP) such as Society or Trust can also hold shares in a company. Further, a group of persons can jointly hold the share in the company.