{"id":4983,"date":"2020-03-17T16:14:58","date_gmt":"2020-03-17T10:44:58","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=4983"},"modified":"2021-04-20T14:50:06","modified_gmt":"2021-04-20T09:20:06","slug":"conversion-of-sole-proprietorship-firm-into-private-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/conversion-of-sole-proprietorship-firm-into-private-company\/","title":{"rendered":"Conversion of Sole Proprietorship Firm into Private Company"},"content":{"rendered":"\n<p class=\"has-drop-cap\">An individual can start a business in several ways like Sole Proprietorship, Partnership, Limited Liability Partnership or Company Incorporation. Sole Proprietorship is also termed as Sole ownership which is a form of business where an individual introduces his own capital and solely handles the business by using his skills and intelligence. Where Sole Proprietorship business has various merits like Easy formation, Secrecy and Full control of the individual and an individual with less capital can start the Sole Proprietorship business without involving any other person. It has some loopholes also which cannot be ignored like limited resources, Not suitable for Large scale business operations and Unlimited liability. These demerits result in Conversion of Sole Proprietorship into other forms of Business. In this topic, we will discuss the conversion process of <a href=\"https:\/\/corpbiz.io\/sole-proprietorship-to-private-limited-company\"><strong>Sole Proprietorship into Private Limited Company<\/strong><\/a>. Before that, it is important to cover a few provisions of Private Limited Company.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-sole-proprietorship-firm-into-private-company\/#What_is_a_Private_Limited_Company\" >What is a Private Limited Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-sole-proprietorship-firm-into-private-company\/#What_are_the_Basic_criteria_of_Private_Limited_Company_Incorporation\" >What are the Basic criteria of Private Limited Company Incorporation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-sole-proprietorship-firm-into-private-company\/#What_are_the_advantages_and_disadvantages_of_the_conversion_of_Sole_Proprietorship_into_Private_Limited_Company\" >What are the advantages and disadvantages of the conversion of Sole Proprietorship into Private Limited Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-sole-proprietorship-firm-into-private-company\/#The_procedure_of_Conversion_of_Sole_Proprietorship_into_Private_Limited_Company\" >The procedure of Conversion of Sole Proprietorship into Private Limited Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-sole-proprietorship-firm-into-private-company\/#Takeaway\" >Takeaway<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Private_Limited_Company\"><\/span>What is a Private Limited Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In India, running a Private Limited Company is a well-known form of doing business.&nbsp; The Private limited company is defined under Section 2(68) of the <strong><em>Companies Act,2013<\/em><\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\">[1]<\/a><\/sup>. A private company is held for small businesses. The shares of the private limited company cannot be freely traded. Mainly, Startups choose Private limited company as a suitable business structure.<\/p>\n\n\n\n<p>A\nPrivate Limited Company means a company which has a minimum paid-up capital as\nmay be prescribed. Further, it must also hold in its Article the below-mentioned\nrestrictions-<\/p>\n\n\n\n<ul><li><strong>On the right to transfer its shares-<\/strong> It restricts the right of the member to transfer its shares freely.<\/li><li><strong>Membership Limitation<\/strong>&#8211; In the case of Private Limited Company, the criteria for members is a minimum number of 2 and a maximum number of 200 members.  <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Basic_criteria_of_Private_Limited_Company_Incorporation\"><\/span>What are the Basic criteria of Private Limited Company Incorporation?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The basic criteria of Private Limited Company Incorporation are-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Minimum 2 members are\nrequired, and a maximum number of members can be 200.<\/li><li>It has a separate legal\nentity.<\/li><li>The liability of the\nmembers is limited.<\/li><li>Only 2 directors are\nrequired.<\/li><li>No criteria of minimum\nshare capital.<\/li><li>DIN and DSC are required\nfor the directors.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_advantages_and_disadvantages_of_the_conversion_of_Sole_Proprietorship_into_Private_Limited_Company\"><\/span>What are the advantages and disadvantages of the conversion of Sole Proprietorship into Private Limited Company? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Before conversion, the business owners shall keep in mind the advantages and disadvantages of conversion-<\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Advantages\nof Conversion-<\/strong><\/h3>\n\n\n\n<ul><li>Company is a Separate Legal Entity.<\/li><li>The members have limited Liability.<\/li><li>A Private limited company avails Tax\nbenefits.<\/li><li>Private Limited Company has perpetual\nsuccession. (Death or insanity of the members) does not affect the continuity\nof the business.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Disadvantages\nof Conversion-<\/strong><\/h3>\n\n\n\n<ul><li>Much compliances and documentation are\nrequired.<\/li><li>Non-Compliances can result in penal\nprovisions (Penalty and Imprisonment) and also the closure of the company.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_procedure_of_Conversion_of_Sole_Proprietorship_into_Private_Limited_Company\"><\/span>The procedure of Conversion of Sole Proprietorship into Private Limited Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There\nare various reasons for the conversion of Sole Proprietorship into Private\nLimited Company i.e. Expansion of business, Better access to financing,\nProtecting the assets, Attracting more and more investors.<\/p>\n\n\n\n<p><strong><em>Various steps and process is required for conversion of Sole Proprietorship into Private Limited Company-<\/em><\/strong><\/p>\n\n\n\n<ul><li>For Private Limited Company incorporation, it is required for the applicant to get a DSC (Digital Signature Certificate) issued by the Certifying Authority, the authenticity of all the documents (<strong>For incorporation and further compliances<\/strong>) is ensured by the DSC.<\/li><li><strong>Documents required for Conversion-<\/strong><\/li><\/ul>\n\n\n\n<ol><li>Id and Address Proof of the Director.<\/li><li>Passport size photograph.<\/li><li>Copy of Rent Agreement (In case of rented property), Copy of Property papers (In case of Owned Property).<\/li><\/ol>\n\n\n\n<ul><li><strong>Criteria for Conversion-<\/strong><\/li><\/ul>\n\n\n\n<p>The\nassets and liabilities of the Sole Proprietorship relating to the business\nbecome the assets and liabilities of the Company.<\/p>\n\n\n\n<p><strong><em>After conversion, the sole proprietor shall not receive any benefits in any form or manner, other than by way of shares allotted to him.<\/em><\/strong><\/p>\n\n\n\n<ul><li><strong>Incorporation of Private Limited\nCompany through SPICE+ FORM<\/strong><\/li><\/ul>\n\n\n\n<p>To\nease the process of doing business, the Ministry of&nbsp;Corporate Affairs has\nintroduced a new&nbsp;<strong>Web Form<\/strong>&nbsp;SPICE+ AND AGILE PRO\nby replacing the existing SPICE form.&nbsp;SPICE+ form is applicable with\neffect from 15<sup>th<\/sup> February 2020.<\/p>\n\n\n\n<p>SPICE+\nform includes all the compliances right from the name reservation of the\ncompany to post-incorporation compliances i.e. Opening of Bank Account.<\/p>\n\n\n\n<p><strong>Spice+\nform is divided into 2 parts-<\/strong><\/p>\n\n\n\n<ul><li>Name reservation of the company<\/li><li>Other Incorporation services. i.e. it\ncovers the incorporation applications after the name gets approved.<\/li><\/ul>\n\n\n\n<p><strong>Other\nIncorporation services include-<\/strong><\/p>\n\n\n\n<ul><li>Director Identification Number.<\/li><li>Issue of PAN Card.<\/li><li>Issue of TAN.<\/li><li>Mandatory issue of EPFO, <a href=\"https:\/\/corpbiz.io\/esi-registration\"><strong>ESIC Registration<\/strong><\/a> and <a href=\"https:\/\/corpbiz.io\/professional-tax-registration\"><strong>Professional Tax registration<\/strong><\/a> in Maharashtra.<\/li><li>Opening of Bank Account for the company.<\/li><li>GSTIN allotment. <\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What details are required for Private\nlimited company incorporation through SPICE+ Form?<\/strong><\/h3>\n\n\n\n<p><strong><em>The details required for Private Limited Company incorporation through <\/em><\/strong><a href=\"https:\/\/corpbiz.io\/learning\/new-spice-plus-form-launched-by-mca\/\"><strong><em>SPICE+ form<\/em><\/strong><\/a><strong><em> is-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Type and\nclass of company<\/li><li>Capital\nStructure of the company i.e. details of Authorised and Paid-up capital<\/li><li>Details of\nthe subscriber and directors.<\/li><li>Information\nrequired in PAN and TAN.<\/li><\/ul>\n\n\n\n<p><strong>Attachments required for SPICE+ Form<\/strong><\/p>\n\n\n\n<ul><li>AOA<\/li><li>MOA<\/li><li>Id and\nAddress proof of the Subscriber and Director<\/li><li>Address\nproof of the office and copy of the Utility Bill<\/li><li>Declaration\nby the first director and subscriber.<\/li><\/ul>\n\n\n\n<p>The\nabove-mentioned procedure and documents are required for the incorporation of a\nPrivate Limited company and conversion of Sole\nProprietorship into a Private Limited Company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Takeaway\"><\/span>Takeaway<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To overcome the obstacles of Sole Proprietorship and for availing the Corporate benefits, it is important to convert the Sole Proprietorship into a Private Limited Company. The conversion process of Sole Proprietorship and Private Limited Company is a bit lengthy and expensive process that involves proper documentation, Criteria for conversion and also incorporation process of Private limited company.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/online-opc-convert-private-limited-company\/\">Conversion Process of One-person company to Public or Private Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>An individual can start a business in several ways like Sole Proprietorship, Partnership, Limited Liability Partnership or Company Incorporation. Sole Proprietorship is also termed as Sole ownership which is a form of business where an individual introduces his own capital and solely handles the business by using his skills and intelligence. Where Sole Proprietorship business [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":4993,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[337,120],"tags":[404],"acf":{"service_id":"42"},"authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/03\/IMG-20220303-WA0005.jpg","authorDescription":"A Company Secretary together with PG in international Business, she has gained significant experience as legal content writer. She has keen interest in doing research and writing on legal and financial subject matters. She also holds work experience in legal compliances.","postViews":10272,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4983"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=4983"}],"version-history":[{"count":15,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4983\/revisions"}],"predecessor-version":[{"id":29231,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4983\/revisions\/29231"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/4993"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=4983"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=4983"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=4983"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}