Steps to convert Partnership Firm into Private Limited Company
The main advantage of setting up a private limited company over a partnership firm is that the latter lacks the status of a distinct legal entity. Limited Liability applies to Private Limited Companies, whereas partners in a partnership firm are personally responsible for all debts. Compared to other corporate structures, the Private Limited structure is more transparent. PLC offers a number of benefits, including Limited Liability, Perpetual Succession, quick access to capital, etc. Put your partnership firm through the process described below to become a PLC.
Pre-requisites to Convert Partnership Firm to Private Limited Company
- The Partnership Deed needs to be filed with the ROC.
- Two or more partners are required.
- All secured creditors' NOC
- In addition, all partners of the partnership firm will convert to stock in the company in the same proportion that their capital accounts were recorded in the firm's books on the conversion date.
- Change the partnership agreement and, if necessary, include a conversion clause.
- Additionally, the majority of members must agree to the conversion by calling a general meeting.
Steps to convert Partnership Firm into Private Limited Company
Detailed instructions for converting a partnership firm into a private limited company:
1. Call a meeting to discuss the Partnership Firm Conversion to Private Limited Company.
- Not fewer than three-fourths of the partners must be physically present in order for the majority of its partners to provide their approval.
- To give permission for two or more partners to carry out all essential actions and to sign all paperwork, deeds, contracts etc.
2. Apply for DSC and DIN for all directors and shareholders of the company.
Obtain the DSC for each shareholder and director. Additionally, if there are any secured creditors of the company, request their written approval or No Objection Certificate.
3. Obtain name Approval in RUN
On the MCA website, submit an application in RUN to request the name for the planned firm following conversion. with a variety of attachments. Adding the proposal for the partnership firm's conversion is also necessary.
4. File Form URC-1 with ROC, with all required attachments.
Within 30 days of the name's approval, submit Form URC-1.
5. Publish an advertisement in Two Newspaper
- In accordance with section 374(b) of the Companies Act of 2013, any firm seeking registration under Part I of Chapter XXI must issue an advertisement regarding registration.
- Seeking any and all objections within 21 days of the notice's publication. The aforementioned advertisement must be in URC-2 Form No.
- Additionally, these must appear in two newspapers, one in English and the other in the district's primary vernacular.
6. Draft MOA and AOA
Therefore, the applicant must prepare the Memorandum and Articles of Association and other pertinent documents required for incorporation after receiving name permission and approval of E-FORM URC-1 from the Registrar.
7. Submit required paperwork to ROC.
Along with the aforementioned forms, submit AGILE, INC-32,INC-33, and INC-34 on the MCA website.
8. Once the Registrar is satisfied with the applications' supporting documentation and information He should issue an incorporation certificate in Form No.INC.11.
9. Intimate ROC under which it was previously registered.
Along with paperwork for its firm's dissolution
List of documents to be attached
With Form URC-1
- A list containing the names, residences, and professions of each person listed as a member, along with information about the shares they each own.
- Moreover, a list of people who have been suggested to be the company's initial directors.
- Each candidate for the first director position must sign an affidavit stating that they are not ineligible to serve as directors undersection 164. (1).
- Additionally, to the best of his knowledge and belief, all documents submitted to the Registrar for the registration of the firm contain accurate, whole, and genuine facts.
- In the event that the firm is registered, the partnership deed and the updated documents.
- A partnership firm's assets and liabilities statement that has been properly certified by a chartered accountant
- Likewise, a copy of the Partnership Firm's most recent tax return.
- A declaration outlining the following details:
- The company's nominal share capital and the share distribution.
- the number of shares purchased and the price per share.
With Form_INC-32,INC-33, INC-34
- DIR-2 Consent to Serve as Director.
- INC-9 First director/subscriber declaration.
- Directors and shareholders of the proposed converted company's KYC document.
- Energy Bill (not older than two months).
- Title or lease document for the company's registered office address.
- Detail of the company's primary goals and other objectives
FAQs
Que - Is conversion subject to capital gains or stamp duty taxes?
Ans- When property is transferred from a partnership firm to a private limited company, neither capital gains tax nor stamp duty will be assessed.
Que - What amount of capital is needed to change a partnership into a private limited company?
Ans- The bare minimums are as follows:
1. The appointment of at least two directors, one of whom must be an Indian citizen.
2. This registration requires a minimum of 2 shareholders. A person can also hold both director and shareholder positions simultaneously.
3. An Indian business location must be listed as the registered office address.
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