PRACTICE DETAILS
- Lawyer Mr. Shaman Jain
- Skills Compliance
- CATEGORY Compliances
ABOUT THIS PRACTICE
Mostly, after running a sole proprietorship successfully for years by a business owner , the next step obviously is to expand the business’ operations by operating as a Private Limited entity.
A new entrepreneur has to overcome many hurdles of operating as a sole proprietorship and so he/she is able to soon discern that working in the form of a Private Limited Company is better than having sole proprietorship.
Proprietorship does not possess any definition, besides that provided to it by one of the many licenses you can take to get one (SSI or GST registration, for example), it is easier to transfer the business to a private limited company . All you have to do is to start a private limited company and submit an agreement between the sole proprietor and the private limited company, proclaiming that all the assets are to be transferred to the latter.
Benefits
- Separate Legal Existence: A private limited company is a discrete legal entity and its existence is entirely different from its members .Thus , enabling a business to have it's own assets and have contracts in the name of the private limited company or sue a third party in situations of a conflict . The members (Shareholders/Directors) of a company do not hold any responsibility towards the creditors of a company relating the company’s debts beyond having a hold in the company.
- Limited Liability of Directors: In case of a private limited company, all the personal assets of the director are left unharmed even if the company is under debt. In order to settle the dues ,the money invested for incorporation or the assets of the company can be sold off.
- Easy Transferability: It is far convenient to transfer the ownership of a business to an individual or to a company by transferring the shares with the consent of shareholders.However, such transfer is not allowed in case of proprietorship.
- Uninterrupted existence: A private limited company being a separate legal entity has eternal succession. Contrary to this, a sole proprietorship, remains unstirred in events of death or any other kind of departure of any member. Changing membership doesn't effect the existence of a private limited company.
Documents Required
- PAN Card: PAN Card of directors and shareholders, Foreign nationals may provide passport
- Address Proof: Aadhar Card and Voter ID/ Passport/ Driving License of all directors and share holders
- Photograph: Latest Passport size photograph of all directors and shareholders
- Business Address Proof: Latest Electricity Bill/ Telephone Bill of the registered office address
- NOC from owner: No Objection Certificate to be obtained from the owner of registered office
- Rent Agreement: Rent Agreement of the registered office should be provided, if any
- Income Tax Returns Acknowledgement: the sole proprietor needs to submit an income tax return acknowledgement.
Precondition
- Assets and liabilities of proprietary concern turn into asset and liabilities of Private Limited Company right before the succession of the propriety concern.
- The proprietor of the proprietary concern holds 50% voting power and shareholding in the private limited company for a duration of 5 years starring from the date of conversion.
- The succeeding sole proprietor does not get any dividend directly or indirectly from the new private limited company except the allotment of shares of the company.
