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Sole Proprietorship To Private Limited Company

A sole proprietorship can be smoothly transformed into a Private Limited Company to unlock numerous advantages such as limited liability, perpetual existence, a distinct legal entity, and the ability to attract additional investors. Private Limited Companies are among the most preferred business structures for startups and growing enterprises due to these benefits.

Registration For Sole Proprietorship To Private Limited Company

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Why Should I Use Auriga Accounting For Sole Proprietorship To Private Limited Company ?

Auriga Accounting has a team of registration experts who can provide complete guidance to register your Sole Proprietorship To Private Limited Company.

book appointment

Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for Registration

Complete your Registration

Complete Your Sole Proprietorship To Private Limited Company

Why Should I Use Auriga Accounting For Sole Proprietorship To Private Limited Company ?

Auriga Accounting has a team of registration experts who can provide complete guidance to register your Sole Proprietorship To Private Limited Company.

book appointment

Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for Registration

Complete your Registration

Complete Your Sole Proprietorship To Private Limited Company

Overview - Sole Proprietorship To Private Limited Company

Small businesses operating as sole proprietorships often face challenges in scaling up due to limited investment capacity, unlimited liability, lack of distinction between ownership and management, and the absence of perpetual succession after the owner’s demise. Additionally, they cannot easily bring in new investors or establish a board, making them less attractive for investment.

Startups and expanding enterprises that begin as sole proprietorships often choose to convert into a Private Limited Company. This structure allows for easier access to external funding, limits the liabilities of shareholders, and enables the company to offer employee stock options to attract top talent. A Private Limited Company is a privately held small business entity recognized as a separate legal entity under the law. It provides a clear separation between ownership and management, restricts shareholding to a maximum of 200 members, and prohibits shares from being publicly traded.

Converting a sole proprietorship into a Private Limited Company involves executing a sale or takeover agreement, with the business takeover clearly stated as the primary objective in the company’s Memorandum of Association (MOA).

Conditions for Conversion of Proprietorship Firm into Pvt Ltd Company

  • All assets and liabilities of the sole proprietorship must be transferred to the company.
  • The sole proprietor should hold at least 50% of the total shares.
  • The sole proprietor’s shareholding must be maintained for a period of five years.
  • No additional benefits or considerations, other than the allotment of shares, should be provided to the sole proprietor.
  • The company’s Memorandum of Association (MOA) should explicitly include “The takeover of a sole proprietorship” as one of its objects.
  • A sale or takeover agreement must be executed between the sole proprietorship and the company.

Advantages of Converting Proprietorship to Pvt Ltd Company

Separate Legal Entity and Limited Liability: A company is a distinct legal person; shareholders’ liability is limited to their unpaid shares, protecting personal assets from company debts.

Perpetual Succession: A company continues to exist regardless of changes in ownership or members’ status, ensuring ongoing existence.

Easy Ownership and Management Transfer: Converting to a Private Limited Company enables issuing shares to investors and transferring ownership, unlike sole proprietorships.

Preferred by Banks and Investors: Their audited accounts make private companies more trustworthy, attracting more support from banks and VCs.

Separation of Ownership and Management: Management is handled by professionals, separate from shareholders, ensuring effective and efficient operations.

Documents Required for Converting Proprietorship to Pvt Ltd

Documents Required from Directors and Shareholders

All proposed directors and shareholders must submit valid, clear copies of the following:

  • PAN Card (scanned copy)
  • Aadhaar Card/Voters ID/Passport/Driving License (scanned copy)
  • Recent proof of address (bank statement, telephone, mobile, or electricity bill not older than 2 months)
  • Passport-sized photograph
  • Any other prescribed documents

Additional Requirements for Foreign Nationals or NRI Directors/Shareholders

Check the specific document list for foreign nationals or NRIs here.

Registered Office Proof

The company must have a registered office in India, which can be residential or commercial. The address proof should be recent (not older than 2 months), including:

  • Utility bills (electricity, mobile, landline, gas, water)
  • No-objection certificate from the property owner or the bill holder

Procedure to Convert Sole Proprietorship into Pvt Ltd Company

Application for Name Approval: The applicant must submit two different proposed names along with the main objects of the company to the MCA for approval. One name will be approved. The chosen name can include “Private Limited” if it does not resemble any existing company, LLP, or trademark.

Application for Digital Signature Certificate (DSC): Once the name is approved, we will apply for the DSC of directors and shareholders to digitally sign the registration forms. If they already possess DSCs, this step can be skipped.

Submission of Incorporation Forms: After name approval and DSC issuance, an incorporation application will be prepared and submitted via SPICE+ along with the Memorandum of Association (MOA), Articles of Association (AOA), and AGILE form for final approval.

Obtain Certificate of Incorporation: Typically, it takes 3-5 days after submission to receive the certificate, which confirms the company’s registration. Simultaneously, PAN, TAN, ESIC, EPFO, and Professional Tax registration certificates will be issued.

Post-Incorporation Registration Updates: All existing registrations or licenses obtained by the sole proprietorship should be canceled, and new registrations should be obtained in the name of the private limited company.

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MD SAHIL
MD SAHIL
2023-06-10
Auriga Accounting is right CA firm is crucial for the financial health of our business. Auriga Accounting is reputable firm with experienced professionals, strong technology infrastructure, good communication, and transparent pricing.
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Prince Kushwaha
2023-06-10
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Prince Singh
2023-06-10
Auriga accouting private limited and it's team provide best service at affordable price. I have done my previous year GSTR and ITR they did it before the time
Priyanka Kumari
Priyanka Kumari
2023-04-07
They are best coordination with me. Time to time inform me how to work and what work is my pending. Time to time updated me about my company profile work like ROC Filling last date, GST filling last date, ITR etc... I have no paid any penalty since I started working with Auriga..
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2023-04-07
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Sameer khan
2023-04-07
The auriga accounting private limited is a reliable and a customer support company the team has give Clear answer towards the customer by which the customer cannot get confused and get necessary detail to solve their queries and auriga provided me good service and delivered my work on time very well coordinate with me and talk very well I suggest if you have any work then call auriga they will definitely finish your work on time
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Vivek Shakya
2023-04-07
Great Services , within affordable rate and give full satisfaction on works. Easy to Cordinate, I have done My Previous year ITR , Startup Registration. I am very happy with their services and their first priority is their Customer.
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find way
2023-04-06
I'll give a five-star rating, I had doubts about how to start my work in the field of business and they guide me and instruct me on how to start a business. They have a great team.
623 Anjali
623 Anjali
2023-04-06
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Anjali Sharma
Anjali Sharma
2023-04-06
Auriga Accounting team represents the highest level of customer services I have experienced.The team gives accurate information and responses to queries very fast, which are customer is facing.

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