Sole Proprietorship to Pvt. Ltd. Company

An Overview on Sole Proprietorship to Pvt. Ltd. Company

CONVERSION OF SOLE PROPRIETORSHIP CONCERN TO A PRIVATE LIMITED COMPANY

SOLE PROPRIETORSHIP BUSINESS: A sole proprietorship concern is a type business enterprise that is owned and controlled by a single person. The sole proprietorship concern has no separate legal existence i.e. there is no distinction between legal owner and the business entity. However, due to shortcomings of unlimited liability, limited capital one can convert their proprietorship concern into a private limited company.

PRIVATE LIMITED COMPANY: For small businesses, the Private Limited Company is the best way to register as a business entity. Typically, this type of company is owned by a group of shareholders, and each shareholder holds a certain number of shares. In accordance with the Companies Act 2013, a company must have at least two members and a maximum of 200 members.

PREREQUISITES FOR CONVERSION::

There must be an agreement between sole proprietor and the private limited company regarding conversion.

The company must incudes the line ‘The takeover of a sole ownership concern’ in the Memorandum of Association (MOA).

The single proprietorship firm’s assets and liabilities must be fully transferred to the private limited company.

Further, the company needs to have a minimum share capital of Rs. 1,00,000/-.