Many business people start their businesses as a Sole Proprietorship due to the low compliance requirements. As the business and the incomes grow, there is a need to separate the bank accounts and the tax filings of the Sole Proprietor and that of the business. To accomplish this separation a possible solution is to convert the Sole Proprietorship into a Private Limited Company.
To convert a Sole Proprietorship into a Private Limited Company, an agreement has to be executed between the Proprietorship and the Private Limited Company (once it is incorporated) for the sale of the business. Further, such Private Limited Company so incorporated must have “the takeover of a Sole Proprietorship Concern” as one of the objectives in its Memorandum of Association.
Conversion to Sole Proprietorship is done through StartupEase LLP.
CONVERSION OF SOLE PROPRIETOR TO PRIVATE LIMITED COMPANY
DOCUMENTS REQUIRED FOR CONVERSION
- Copy of PAN Card of the Directors
- Passport size photograph of Directors
- Copy of Aadhaar Card/ Voter identity card
- Copy of Rent agreement(If rented property)
- Electricity/ Water bill (Business Place)
- Copy of Property papers (If owned property)
- Landlord NOC (Format will be provided)
Conditions for Conversion
- All the assets and the liability of the Sole Proprietory concern relating to the business immediately before the succession become the assets and the liability of the company.
- The shareholding of the sole proprietor in the private limited company is not less than 50% of the total voting power in the company and his shareholding continues to remain so for a time period of 5 years from the date of the succession.
- The sole proprietor does not receive any benefit or consideration, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company.
MINIMUM REQUIREMENTS FOR CONVERSION
- Minimum 2 Shareholders for Private Limited Company Registration
- Minimum 2 Directors
- Minimum Rs.1 Lac Share Capital
- DIN for all Directors