Accelerate your business growth by transitioning your legal structure from a Proprietorship to a Private Limited Company
The initial choice of a sole proprietorship is often driven by its minimal compliance burden. As a business scales, however, two critical needs emerge: limiting personal liability and distributing compliance responsibilities. Converting to a Private Limited Company provides a practical pathway to meet these needs. This conversion mandates two key steps:
The promoters must execute an agreement to formally transfer the business.
The Memorandum of Association (MoA) for the new entity must explicitly include ‘the takeover of the Sole Proprietorship Concern’ among its main objectives
A private limited company is a distinct legal entity separate from its members, enabling it to own assets, enter into contracts, and take legal action independently. Shareholders and directors have limited liability, restricted to the value of their shares, and are not personally responsible for the company’s debts.
In a private limited company, directors’ personal assets remain protected and cannot be used to pay the company’s debts. Only the company’s assets and the capital invested by shareholders are liable for settling outstanding obligations.
In a private limited company, ownership can be transferred to another individual or company through the transfer of shares, subject to existing shareholders’ consent. This makes ownership transfer straightforward, unlike in a proprietorship where such transfers are not allowed.
As a separate legal entity, a private limited company enjoys perpetual succession, continuing its existence regardless of any member’s death or exit, unlike a sole proprietorship.
Partners are required to provide their PAN, while foreign nationals may submit a valid passport.
Self-attested copies of Aadhaar Card and Voter ID, Passport, or Driving License for all directors and shareholders.
Recent passport-sized photographs of all directors and shareholders.
Recent electricity or telephone bill as proof of the registered office address.
No Objection Certificate (NOC) from the owner of the registered office.
Submit the rent agreement if the registered office is on a rental basis.
Provide the most recent Income Tax Return acknowledgment of the sole proprietorship.
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*Subject to Government processing time
A Private Limited Company requires a minimum of two members who will act as directors. While there’s no mandatory minimum capital requirement, a government fee is applicable for issuing a minimum of shares worth ₹1 lakh (Authorized Share Capital) during company registration.
A Pvt. Ltd. company would need two or more members who shall act for as directors of the said company. It is a general practice that the shareholders of the company play the role of directors. It does not require any minimum amount to be infused as capital. However, a certain fee must be paid to the Government for issuing a minimum of shares worth ₹ 1 lakh [Authorized Share Capital] during company registration. Also, there is no requirement to show proof of capital invested during the registration process.
Starting a business under the Pvt. Ltd structure is advantageous as it creates trust and credibility. Its easier to get loans, and it helps in attracting more financial institutions, suppliers and potential clients. financial institutions and individuals prefer investing in companies that are reliable and private limited companies offer such a reliability factor, as compared to a structure like a sole proprietorship or general partnership. Therefore if you are looking for expanding or trustworthiness is an important part of business its a very good option
Once a Company is incorporated, it will be active and in existence as long as the annual compliances are met regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. A struck-off Company can be revived for a period of up to 20 years.
Call us at: 9414883452 or Email us : contact@submitreturn.com
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Scale your business from Proprietorship to Pvt. Ltd Company to multiply business growth
