CONVERSION OF PARTNERSHIP FIRM TO PRIVATE LIMITED

Initially, many individuals start their business as a Sole Proprietorship or a Partnership firm because of its low budget and compliance requirements, with the thought process that the Partnership business will grow, and the revenues involved will become more. Further, to limit the liability and to avail the benefits and for wider recognition, the Partnership business often gets converted into a Private Limited Company.

By converting a Partnership firm to a private limited company, which becomes a separate legal entity, reduce the risk of liability, and the personal assets will remain untouched, except in case of fraud. The incorporation and compliance procedure of a private limited company is as per the Companies act, 2013, and the shares are held privately.

• The advantages of converting the Partnership firm into a Private Limited      Company is that, the Private Limited Company enjoys the status of a      separate legal entity that a Partnership firm does not. 
• Private Limited Company has Limited Liability. However, in the case of the Partnership firm, partners are personally liable for every debt.
• The formation of a Private Limited company is more transparent than      other business structures. Private Limited Company has its advantages such      as Limited Liability, Perpetual Succession, easy access to funds, etc. which, the Partnership firm does not possess.
• The ownership gets transferred if the shareholders provide their consent. However, in the case of a Partnership Firm, the partner cannot transfer its share without referring to the Partnership deed.
• Compliances are moderately high in Private Limited Company as      compared to Partnership firm.

We strongly believe that Corporatization is the need of the hour. The entire world is gradually becoming a global market, while every entrepreneur is trying to reduce the trade barriers occurring in the business. A Partnership firm having limited partners will not be able to grow on a large scale until and unless it converts itself into a Company.

Below mentioned are the benefits of converting a Partnership firm into Private Limited Company-

• Shareholders have limited liability.
• Raising the fund is easier in the company, as there is no restriction on the number of shareholders.
• Separate legal entity.
• Expansion and Diversification.
• Changes and alterations related to shareholding and management can be done without interrupting the business policies.
• Control of the company cannot be lost to outsiders.
• Transfer of assets and liabilities.
• No Capital gain tax shall be charged on the transfer of property from firm to company.
• Enjoys perpetual succession.

What Documents are required for Conversion of a Partnership Firm into a Private Limited Company?

Following documents are required for Conversion of a Partnership firm into a Private Limited Company-

• Particulars of the members reflecting the names, addresses, and occupations of all along with details of shares held by them.
• Particulars of individuals proposed as the first directors of the company.
• An affidavit from the individuals proposed as the 1st directors, that he/she is not disqualified to be a director under section 164(1). Additionally, all the documents filed with the ROC for the incorporation of the company contain information that is accurate and true to the best of the applicant’s knowledge and belief.
• Particulars of the partners of the firm i.e. the Identity and Address Proof of the partners.
• Copy of Partnership Deed. Also, in case the Partnership deed was revised at any time in the past, copies of the principal and all altered deeds. Additionally, if the firm is registered, the certificate of the registration issued by the Registrar of Firms is also required.
• A statement of assets and liabilities of the Partnership Firm duly certified by a Practicing Chartered Accountant which is made as on a date not earlier than 30 days of the filing of form no.URC-1
• All the Income tax-related documents of the Partnership Firm.
• A copy of Newspaper Advertisement.
• No Objection Certificate from all the secured creditors of the applicant firm.
• A Consent from the majority of Partners.
• A statement specifying-

The nominal Share Capital of the company,

The number of shares,

The number of shares taken, and

The amount paid on each share,

The name of the company, with the addition of the word “Private Limited”.

Scanned Copy of: 

· PAN & Aadhaar of all the Subscribers/Directors

· Passport size photograph of all the Subscribers/Directors

· Specimen Signature of Authorised Signatory 

· Utility Bill of Registered office address (Not older than 2 months) (Electricity bill preferred) 

· No objection certificate from legal owner of Registered office address (Format to be provided by Yourlegalexpert.in) 

· Driving License or Passport or Voter’s ID (Any one of it) of every Subscribers/Directors

· Latest Bank Statement (without password protection) or Electricity Bill or Mobile Bill or Telephone Bill of every Subscribers/Directors.(Any one of it) (Not older than 2 months)

Information Required: 

· Email Id & Phone No. of all Subscribers/Directors

· Highest Qualification of all Subscribers/Directors

· Place of Birth of all Subscribers/Directors

· Number of Months/Years of stay at current address 

· Main Business Objects of Proposed Company

· Capital Contribution and shareholding division