Sole Proprietorship To PVT LTD

Minimum Requirements For Converting A Proprietorship Firm Into A Private Limited Company


1 Minimum 2 directors
2 Minimum 2 shareholders for registration of a private limited company
3 Minimum Rs.1 Lakh share capital.
4 DIN (Director Identification number) for all directors.
5 Business owner should mention “Takeover of sole proprietorship concern” as one of the objectives in
Memorandum of association.


Documents Required In Converting Sole Proprietorship Into A Private Limited Company

1 Latest photograph of all directors & shareholders
2 PAN card copy of directors & shareholders (Passport in case of foreign nationals)
3 Address proof of all directors & shareholders (Aadhar card and Voter id/passport/driving license)
4 Address proof of registered office (electricity bill/telephone bill of the registered office)
5 Non-objection certificate (NOC) from the owner of the registered office
6 Rent agreement of the registered office (If office is situated at a rented place)
7 Income tax return acknowledgement by the sole proprietor

Benefits Of Converting Proprietorship Firm Into A Private Limited Company

Separate legal entity – Private limited company enjoys the benefit of separate legal entity as its
existence is separate from its members. The members of the company have no personal liability towards
the creditors for company’s debts.

Limited liability – By conversion into a private limited company, the business owner enjoys the benefit
of limited liability too. In case of outstanding debts, director’s personal assets are not being touched and
assets of the company or the money invested for incorporation is used in paying off the debts.

Easy transferability – Business owner can easily transfer the ownership of business to an individual or
to a company by transferring shares after getting approval from shareholders whereas in case of sole
proprietorship, no such transfer is allowed.

Uninterrupted existence – A private limited company enjoys the benefit of perpetual succession too as
it is unaffected by the death or departure of any member of the company unlike sole proprietorship.
Company continues to exist irrespective of the changes in membership.


Procedure Of Converting Proprietorship Into A
Private Limited Company
In the first step, all the directors have to apply for DSC (digital signature certificate) & DIN (director identification number) and it is a mandatory requirement.

In the second step, name selection is done for the new private limited company. After selecting the
name, you need to check the name availability (https://www.finacbooks.com/blog/how-to-checkcompany-name-availability-online) with registrar of companies (ROC). The name of the private
limited company should be unique and does not match the name of any existing company.


After getting the name approval from the registrar, you need to complete all these procedures as
early as possible –

1 Drafting of MOA, AOA & other documents and mention “Takeover of sole proprietorship
concern” as one of the objectives in MOA.
2 Stamp duty payment
3 Notarization of required documents


After completing all these procedures, you need to file an application with MCA (Ministry of
corporate affairs) for registration of private limited company along with the application for DIN
allotment.

In the fifth step, MCA will verify all documents and if found satisfactory, MCA issue a certificate of
incorporation of a new private limited company.

Apply the fresh PAN and TAN number (https://www.finacbooks.com/tan-registration-services) of the
company in the sixth step.

Finally, change your old current bank account on new private limited company name.