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Partnership into company

Partnership firm into LLP

Change of Partnership firm into a Private Limited Company is a decent alternative for any individual who wishes to grow little and medium scale undertakings to an enormous scope one, or for the equity Capital.

With the appearance of the organization’s change act 2017, the criteria of requiring at least seven individuals for any substance to be changed over into a Private Limited Company has been finished with. Under the changed segment 366 of the organization’s Act, 2013 any entity be it an LLP, association firm, co-usable society, or some other business substance shaped under some other law, with least two individuals can be registered as a Private Limited Company. Such conversion to take place is to be satisfied with other requirements such as securing approval from all partners and secured creditors for such conversion, a notification in the paper to be given in one English and one vernacular language looking for complaints lastly followed by the incorporation process of Private Limited Company.

Another option available to the partners is to incorporate a separate Private Limited Company and after that sell, the entire business of Partnership Firm transferred to the company through a written agreement under which the above-mentioned requirements such as the requirement for having a minimum of two partners, newspaper advertisement, etc. are not required to be satisfied but may attract stamp duty on transfer of property through takeover agreement and may vary in different states.

Following are the benefit of the conversion of the Partnership firm into the Company.

Assets & Liabilities: – All the assets and liabilities of the Partnership firm will become after conversion of the assets and liabilities of the company.

Partner: – Minimum Two or more Partners required in the existing Partnership firm for converting the Partnership firm into a Private Limited Company.

Accumulated Depreciation: – The Previous accumulated loss and unabsorbed depreciation of the Partnership firm would become the loss/ depreciation of the successor company for the previous year in which conversion was effected. Further such loss can be carried by Successor Company for maximum for a further eight years.

Shareholders: – All partners of the existing partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.

Taxation: – Transfer of property from Partnership firm to Company, firm don’t have to pay any Capital Gains tax on such transaction.

Goodwill: – The brand value and its goodwill are kept intact and continues to enjoy the success company as well as legal litigation.

No Stamp Duty: – In this conversation, there is no need to pay stamp duty on the transfer of all movable and immovable properties of the Partnership firm automatically vest in the Company.

Shareholding:- The partners get the consideration only by way of allotment of shares in the company and the partner’s shareholding in the company must be aggregate is 50% or more of its total voting power.

Following are the disadvantages of partnership firms into the company.

  1. Pass-through taxation is lost meaning the share of the partner is exempt from tax after the partnership firm have paid tax unless in a private limited company.
  2. Loss of control in a company as compared to the partnership firm.
  3. The cost of compliance is increased.

Following are the documents required for conversion of partnership firm into Company

  1. Partnership Deed with amended in the clause of conversation is no exist.
  2. NOC from all stakeholders like a secured creditor.
  3. KYC of all partners, like Aadhar card pan, etc.
  4. PAN of the partnership firm.
  5. Consent of all partners must be needed.

All about Conversion of partnership firm into company

Partnership firm into LLP

Change of Partnership firm into a Private Limited Company is a decent alternative for any individual who wishes to grow little and medium scale undertakings to an enormous scope one, or for the equity Capital.

With the appearance of the organization’s change act 2017, the criteria of requiring at least seven individuals for any substance to be changed over into a Private Limited Company has been finished with. Under the changed segment 366 of the organization’s Act, 2013 any entity be it an LLP, association firm, co-usable society, or some other business substance shaped under some other law, with least two individuals can be registered as a Private Limited Company. Such conversion to take place is to be satisfied with other requirements such as securing approval from all partners and secured creditors for such conversion, a notification in the paper to be given in one English and one vernacular language looking for complaints lastly followed by the incorporation process of Private Limited Company.

Another option available to the partners is to incorporate a separate Private Limited Company and after that sell, the entire business of Partnership Firm transferred to the company through a written agreement under which the above-mentioned requirements such as the requirement for having a minimum of two partners, newspaper advertisement, etc. are not required to be satisfied but may attract stamp duty on transfer of property through takeover agreement and may vary in different states.

 

Following are the benefit of the conversion of the Partnership firm into the Company.

Assets & Liabilities: – All the assets and liabilities of the Partnership firm will become after conversion of the assets and liabilities of the company.

Partner: – Minimum Two or more Partners required in the existing Partnership firm for converting the Partnership firm into a Private Limited Company.

Accumulated Depreciation: – The Previous accumulated loss and unabsorbed depreciation of the Partnership firm would become the loss/ depreciation of the successor company for the previous year in which conversion was effected. Further such loss can be carried by Successor Company for maximum for a further eight years.

Shareholders: – All partners of the existing partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.

Taxation: – Transfer of property from Partnership firm to Company, firm don’t have to pay any Capital Gains tax on such transaction.

Goodwill: – The brand value and its goodwill are kept intact and continue to enjoy the success company as well as legal litigation.

No Stamp Duty: – In this conversation, there is no need to pay stamp duty on the transfer of all movable and immovable properties of the Partnership firm automatically vest in the Company.

Shareholding:- The partners get the consideration only by way of allotment of shares in the company and the partner’s shareholding in the company must be aggregate is 50% or more of its total voting power.

Following are the disadvantages of partnership firms into the company.

  1. Pass-through taxation is lost meaning the share of the partner is exempt from tax after the partnership firm have paid tax unless in a private limited company.
  2. Loss of control in a company as compared to the partnership firm.
  3. The cost of compliance is increased.

 

Following are the documents required for conversion of partnership firm into Company

  1. Partnership Deed with amended in the clause of conversation is no exist.
  2. NOC from all stakeholders like a secured creditor.
  3. KYC of all partners, like Aadhar card pan, etc.
  4. PAN of the partnership firm.
  5. Consent of all partners must be needed.

Frequently Asked Questions

Yes, as per the provision of the Companies Act, 2013 the words Limited or Private limited must be added at the end of the name of the company depending on its nature.

The documents have to be filed within 30 days from the date of approval of the name of the Company.

Documents required in E-form URC-1

Documents required in Spice+ form

Yes, it is consent from the director to act as a director of the proposed company.DIR-2 is compulsory in SPICE+.