Every business tends to grow with time and effort. Moreover, as the business grows, the demands gain a rise too. In that case, proprietorship begins showing a lot of drawbacks for a business. Hence, as an entrepreneur, you need to convert your proprietorship firm to a well-established private limited company. While doing so, you can enjoy a handful of benefits for your business.
Exclusive Benefits
Simple transfer of ownership
When your business is private limited, you can transfer its ownership to a company or an individual easily. All you need to do is transfer your shares to the stakeholder and you don’t get such an option in proprietorship.
Separate legal entity
The existence of a private limited company is distant from its members. That’s because a private limited company acts as a separate legal entity. Therefore, this allows the business to get assets on the name of the company.
Exist uninterruptedly
Private limited business doesn’t get affected by the death of any board member. That’s because a legal entity has its own perpetual succession. Therefore, the existence of a private limited company will remain regardless of membership changes.
Limited director assets
The money invested for the assets of a private limited company can be sold for clearing the dues. The director’s personal assets are never touched in case of any outstanding debts of a company. Therefore, directors have very limited liability.
Checklist for conversion
Here's a quick checklist of what you need to do for the conversion of proprietorship to a private limited company:
- Fill a digital signature certificate application
- Check the availability of the desired name
- Fill a name reserve application as per “RUN.”
- Draft documents such as AoA, MoA, etc.
- Fill DIN allotment application
- Submit stamp duty payment
- Getting a notary for your documents
- Filling out the company registration application
- Filling out DIN allotment application
- Filling out PAN and TAN application for your company
- Waiting for processing time by the government
How to convert?
The process of converting a proprietorship firm into a private limited company is pretty straightforward. Here is a step by step procedure to do this:
Begin with the basics
The process starts with a small questionnaire where you need to fill answers to questions. After that, you need to provide your basic details and submit the required documents to proceed with the registration.
Take help from experts
- To proceed with the registration, you need to have a relationship manager with you. Moreover, you need digital signatures, and for that, you must have procurement.
- Once you arrange these two, you need to fill the application of the name reservation.
- After that, you need to draft the MOA, AOA, and other documents.
Wait for registration to complete
Now you’re done with all major requirements for getting your company registered.
- Now you just need to wait for 12-15 days for letting your registration complete.
- After that, your proprietary firm will be converted into private limited business.
Documents required
Here’s a rundown of necessary documents that you need for converting into a private company:
- Address proof: You need to have Aadhar card, passport, or voter ID of all shareholders and directors.
- Business address proof: You must have a telephone bill or last electricity bill for the registered office address.
- PAN card: You need to provide the Pan card of shareholders and directors. In case the individuals are foreigners, a passport will work fine.
- Photograph: A passport size photo of all shareholders and directors is required.
- Rent agreement: If the office is rented, then rent agreement needs to be provided.
- NOC from the owner: The owner of the registered office must provide a no-objection certificate to you.
- Acknowledgment of income tax return: An acknowledgment of income tax return needs to be submitted by the sole proprietor.
Frequently asked questions
Are NRI allowed to be a director?
Yes, NRI’s are allowed to be directors as per DIN.
Are two directors necessary for a private limited registration?
Yes, at least two directors are required for the conversion to take place.
How much time does it take for the registration?
Usually, it will take around 12-14 days.
What are the requirements for getting a membership of a Pvt. Ltd company?
You just need to be an individual or an organization.
Is there any additional fee apart from the conversion fee?
No, there are no additional or hidden charges.
Is any requirement of physical presence for completing the process?
No, the whole process works completely online, and you don’t need to visit the office.
What is the validity of the registration of my company?
The company will remain active until annual compliances are paid.
Is Pvt. Ltd structure a good option for my business?
Yes, Pvt. Ltd structure brings credibility and trust for your business.
How does name reservation work?
According to RUN, you need to provide two names with their purpose.