As a business develops, the requests of business and the disadvantages of a proprietorship firm could force the entrepreneur to begin the procedure for the transformation of proprietorship into a private Limited Company. A private Limited Company offers noteworthy points of interest over the proprietorship type of business, including that of restricted risk, raised equity capital, proceeded with presence.
Numerous Business persons start their business as a Sole Proprietorship because of the low compliances. As the business and the wages develop, there is a need to separate the bank accounts and the tax filings of the Sole Proprietor and that of the business. To achieve this partition a potential arrangement is to convert over the Sole Proprietorship into a Private Limited Company.
To convert over a Sole Proprietorship into a Private Limited Company, an agreement must be executed between the Proprietorship and the Private Limited Company (when it is incorporated) for the offer 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.
Advantages of Private Limited Company as compare to Proprietorship.
A sole proprietor would be incurred with unlimited liabilities for any losses incurred, which means that he/she will be required to pay personally for any losses incurred by the firm. The regulation of a private limited company makes a distinction between the owner and the entity, thereby making his/her liabilities limited.
Sole proprietors will be taxed on their personal income tax rate, which isn’t the case with a private limited entity. .
Sole proprietorship firms are not vested with adequate fund-raising options, in contrast to a private limited entity.
The demise of a sole proprietor would lead to the shutdown of the firm, whereas a private limited Company facilitates the legal heirs to rightfully take over the affairs of the business
Documents required converting into PVT.
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)