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Proprietorship to Private Limited Company
Convert Proprietorship to Private Limited Company
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Converting a Proprietorship to a Private Limited Company is a legal process that changes the business structure from a sole proprietorship to a private limited company. This conversion allows the business owner to benefit from limited liability protection, which shields personal assets from business liabilities. Additionally, a private limited company can access more capital, enjoy a better legal status, and have more flexible ownership transferability. The process involves fulfilling legal requirements, such as registration with the Registrar of Companies (ROC), drafting and filing the necessary documents, and adhering to the Companies Act, 2013. This conversion enables the business to grow and expand under a more structured and protected legal framework.

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Convert Proprietorship to Private Limited Company

Converting a Sole Proprietorship into a Private Limited Company is often pursued to separate personal finances from business operations, especially as the business grows. This transition offers advantages such as limited liability, access to equity capital, and perpetuity of existence.
Key requirements to consider during the conversion process include:
  • • Execution of Agreement: A formal agreement must be executed between the Sole Proprietorship and the Private Limited Company (once incorporated) for the sale of the business.
  • • Incorporation Objective: The Memorandum of Association (MoA) of the Private Limited Company must explicitly include "takeover of a Sole Proprietorship Concern" as one of its objectives.
  • • Transfer of Assets and Liabilities: All assets and liabilities of the Sole Proprietorship need to be transferred to the Private Limited Company.
  • • Involvement of Sole Proprietor: The sole proprietor should become a member of the board of directors of the Private Limited Company, holding at least 50% of the voting power.
  • • Financial Considerations: Ensure no direct or indirect benefit accrues to the sole proprietor except through the allotment of shares in the Private Limited Company.
  • • Corporate Structure Requirements: The Private Limited Company must have a minimum of two shareholders and two directors, all of whom need to obtain Director Identification Numbers (DIN).
Adhering to these requirements ensures a lawful and orderly conversion process, facilitating the transition from a Sole Proprietorship to a Private Limited Company while complying with regulatory standards.

Documents Required for Convert Proprietorship to Private Limited Company

Here is a refined and professional rephrasing of the document requirements for Directors & Shareholders and Registered Office of a company:

For Directors & Shareholders

Self-attested copy of PAN Card.
Self-attested copy of any one Identity Proof (Aadhar, Voter’s ID, Passport, Driver’s License).
Self-attested copy of Address Proof in the name of the director (Utility bill like mobile bill, water bill, electricity bill, or bank statement not older than two months).
Passport-sized photograph.

For Registered Office

Rent Agreement (Notarized copy for rented property).
Sale Deed or Property Deed in English (for owned property).
No-objection Certificate from the property owner.
Latest Utility Bill (Electricity Bill, Mobile or Telephone Bill, Bank Statement, or Gas Bill).
These documents are essential for ensuring compliance and establishing the legal framework necessary for the incorporation or registration of a company. Each requirement serves a specific purpose in verifying the identity, address, and ownership or tenancy of directors, shareholders, and the registered office premises.

Procedure for Registration

Here is a refined and professional rephrasing of the steps involved in registering a Private Limited Company:

Step 1

Obtaining DSC and DIN Digital Signature Certificate (DSC) and Director Identification Number (DIN) are prerequisites for filing company registration documents. Proposed Directors can obtain their DSC and DIN within 1 to 2 days by submitting scanned documents and details online. Our representatives will assist in filling out the forms and completing the submission process.

Step 2

Name Approval Submit a list of one to six proposed names to the Ministry of Corporate Affairs (MCA). Name approval is subject to availability, adherence to naming guidelines, and MCA processing time, typically taking 2 to 3 working days.

Step 3

Drafting MOA and AOA Electronically Draft the Memorandum of Association (MOA) and Articles of Association (AOA) electronically using Spice MOA (INC-33) and Spice AOA (INC-34). This process generally requires 2 to 3 days to complete.

Step 4

Company Registration After electronically drafting the MOA and AOA, submit the incorporation application using SPICe Form INC-32 along with links to Spice MOA (INC-33) and Spice AOA (INC-34) to the MCA. The MCA typically processes the application and approves incorporation within 5 to 7 days. It's crucial to file forms 49A (PAN application) and 49B (TAN application) along with SPICe (INC-32) within 2 days of submission to avoid invalidation of the incorporation application.
Following these steps ensures a systematic and compliant approach to registering a Private Limited Company, aligning with legal requirements and facilitating the timely establishment of the business entity.

Choose Lexprosoft for Convert Proprietorship to Private Limited Company !

Lexprosoft offers expert services to facilitate the conversion of a sole proprietorship into a private limited company. By guiding you through every step of the process, Lexprosoft ensures full compliance with the Companies Act, 2013, and other legal requirements. This conversion provides you with limited liability protection, access to capital, and improved legal standing for your business. Additionally, Lexprosoft helps you with the smooth transition of ownership, filing necessary documents, and leveraging tax advantages. With tailored solutions and professional support, Lexprosoft ensures a seamless and efficient conversion process, setting your business up for long-term success.
Contact our Experts today and take the first step towards your startup success!
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Conversion of a Proprietorship to a Private Limited Company FAQ's
What are the key advantages of converting a proprietorship to a private limited company?
Converting a proprietorship to a private limited company provides limited liability protection, enhances credibility, allows for raising capital through equity, and enables better tax planning and business continuity.
Can a sole proprietor convert their business into a private limited company?
Yes, a sole proprietor can convert their business into a private limited company, but it requires creating a separate legal entity with a board of directors and shareholders. The proprietor typically becomes the director and shareholder of the new company.
What happens to the existing assets and liabilities when converting a proprietorship into a private limited company?
The assets and liabilities of the proprietorship can be transferred to the private limited company upon conversion. The company takes over all rights and obligations of the business.
Does the business name change when converting a proprietorship to a private limited company?
Yes, the name of the proprietorship must change to include “Private Limited” or “Pvt. Ltd.” as per the requirements of the Companies Act, 2013.
Can the same business activities continue after the conversion to a private limited company?
Yes, the business activities can continue after the conversion, as the new company will carry on the business of the proprietorship under the same name, provided that the conversion process is legally compliant.
Will there be any tax implications during the conversion from a proprietorship to a private limited company?
While the conversion is generally tax-neutral, it may lead to changes in tax rates and filing obligations. The private limited company is taxed as a separate legal entity, and taxes may be levied differently compared to a proprietorship.
Does the proprietor need to obtain any new licenses or permits after the conversion?
Yes, depending on the nature of the business, the private limited company may need to obtain new licenses, registrations, or permissions. For example, GST registration, trade licenses, and other sector-specific licenses may need to be updated or re-applied under the company’s name.
Can the proprietor retain ownership and control of the business after conversion?
Yes, the proprietor can retain full ownership and control as the sole shareholder and director of the private limited company, but they will now be operating as a company rather than a sole proprietor.
What happens to the debts and liabilities of the proprietorship during conversion?
The debts and liabilities of the proprietorship are transferred to the private limited company as part of the conversion. The company will take on the responsibility for all existing obligations.
Can the business continue to be run under the same brand after the conversion?
Yes, the business can continue to be run under the same brand name, provided it is legally available for use by the new private limited company. However, the company will need to ensure that the trademark or brand name is properly protected under intellectual property laws.
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