It’s simply impossible for a sole proprietorship to avail the entire advantage of the functionalities as it expands. This is the reason that the need to convert the proprietorship to Pvt Ltd Company is highly felt. There are various advantages, ranging from greater capital, nominal liability, etc.
At the same time, providing a range of advantages, conversion of proprietorship to Pvt. Ltd comes up with dispersion of power and lack of independence. This is the reason that it is considered essential for decision to be taken thorough post consideration of each of the aspects associated and ensuring whether it actually provides any kind of advantages associated.
Anyone prior to going for conversion of proprietorship to Pvt Ltd is essential to remain aware of the following aspects.
1. Norms for Conversion
1) It is essential for a takeover agreement; in other words, a sale agreement to be put in between the complete proprietorship and company.
2) It is essential for The Memorandum of Association of MOA to take-up the element “The takeover of a sole proprietorship.”
3) The entire assets and the responsibilities of the sole proprietorship is essential to get delivered to the concerned company.
4) It is essential for the shareholders of the proprietors not to be under fifty percent of the voting power, and this is essential to be continued for a period of a minimum of five years.
5) It is here to note that the proprietor does not get any extra advantage, be it about straightaway or indirectly. But, it has to be done only up to the share that has been held.
2. Ways of converting Proprietorship to Company
Mentioned below are the steps associated with the conversion of the proprietorship to the company when the following conditions are fulfilled.
1) It is essential for the proprietor to finish the slump sale procedures.
2) It is essential that the Director Identification Number or DIN and the Digital signature certificate (DSC) to be got through all the associated directors.
3) It is essential for the proprietor to fill application to ensure that there is a name in Form-1.
4) Make the MOA and AOA of the concerned company mentioning the objects and the norms of the same.
5) Do apply for incorporating the Company to Ministry of Corporate Affairs (MCA).
6) It is essential to submit the whole range of suitable documents.
7) Get the Certificate of Incorporation.
8) Do apply for updated PAN and TAN.
9) Do needful changes with bank details according to the conversion.
3. Essential documents meant for Conversion
One must possess the following set of documents for conversion.
1) Copy of PAN Card of all the directors as the identity proof.
2) In support of address proof, there must a copy of Aadhar card or voter ID.
3) There must be a passport size photo of Directors.
4) Upon owning, one must provide proof of authorization of business center.
5) Must submit rental agreement in case it is on rent.
6) There must be a proper No Objection Certificate of NOC of the concerned Landlord.
7) There must be proper documents in support of electricity bill or water bill.
It is essential to fill the right forms for submitting to the MCA. In this context, the following norms are essential to be followed.
1) It is essential for the Form 1 to get filed with the MOA, AOA and other documents.
2) Form 18 cites complete detail regarding the concerned registered office.
3) Form 32 provides details of the directors.
4.Fundamental needs for establishing a Private Limited Company
In order to set up a private limited company from a sole proprietorship, the method is to establish the Pvt. Ltd Company and then obtain the sole proprietorship through a Memorandum Of Association (MoA) and pass the entire benefits and liabilities to the concerned limited company. In this context, the following aspects are essential to be addressed prior to filing an application for a certificate of incorporation.
For the establishment of a private limited company, it is essential that at least to have a team of two directors. Anyone of them can be the proprietor, whereas the other can be his/her relative or friend.
B) Director Identification Number:
It is essential for the director to have an Identification Number that is essential for the incorporation.
The Company is essential to possess at least a couple of shareholders, and they can hold the same rank as of the directors. The authorization of the sole proprietorship is essential to be one of the directors of the limited company.
It is essential for the company needs to possess a capital of at least 1 Lakh INR.