There are limitations on Propritory form such as capital, lack of transferability, unlimited liability etc when the firm grows it is inevitable on the part of businessman to get it converted into company.
Transfer of assets and liabilities
All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
No Stamp Duty
No stamp duty is required to be paid on transfer of business.
No Capital Gain Tax
conversion doesnt attract capital gain tax.
Carry Forward and Set off Losses and Unabsorbed Depreciation
When we transfer business from proprietor to company losses and depreciation can be transferred to the company.
CONDITIONS SUBJECT TO WHICH TRANSFER IS COMPLETE: The Proprietor receives consideration only by way of allotment of shares in company. The Proprietor share holding in the company in aggregate is 50% or more of its total voting power and continue to be as such for 5 years from the date of conversion.
• Registered Partnership firm with minimum 7 Partners
• Minimum Share Capital shall be Rs. 100,000 (INR One Lac) for conversion into a Private Limited Company
• Minimum Share Capital shall be Rs. 500,000 (INR five Lac) for conversion into a Public Limited Co.
• If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered
• Minimum 7 Shareholders
• Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
• The directors and shareholders can be same person
• DIN (Director Identification Number) for all the Directors
• DSC (Digital Signature Certificate) for two of the Directors
HOW TO CONVERT PARTNERSHIP FIRM INTO PRIVATE/ PUBLIC COMPANY