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Many people start their businesses as single proprietorships because of the low compliance requirements. As the business and earnings grow, it becomes important to separate the bank accounts and tax filings of the sole proprietor from those of the company. The transformation of a sole proprietorship into a private limited company is a viable option for achieving this separation.
To convert a Sole Proprietorship into a Private Limited Company, an agreement for the sale of the firm must be signed by the Proprietorship and the Private Limited Company (once it has been incorporated). Furthermore, the Memorandum of Association of such a Private Limited Company must include “the takeover of a Sole Proprietorship Concern” as one of its purposes.
Minimum Requirements For Converting A Proprietorship Firm Into A Private Limited Company
Once the filing of the documents is through, the ROC calls the attorney on a specific date for scrutiny and makes the necessary changes in the MoA and AoA, which have been filed. After this is done, the Certificate of Incorporation is granted to the company. Upon successful completion of the registration process, you will receive Private limited company registration certificate”
No, there is no such requirement. Any person can start a business at their “Place of residence or any other place”. Though you will incur “Private limited company registration cost”.
• A company limited by shares
• Unlimited company
• A company limited by guarantee.
You need to have a minimum capital of Rs.1,00,000 to start a private limited company. You need not have this amount in hand or your bank account. You can show this amount as the pre-incorporation expense of the start-up. Also, you can show the capital as infused in the assets.
In case it has been mentioned in the “MoA” and approved by the registrar of the company, then only it is possible to carry out multiple businesses. The businesses could be in the same field or different.
There are only 2 conditions for anyone to be a director of the Private Limited Company.
These are:
• He/she should be 18 years or older
• He/she require a DIN (Director Identification Number)
Yes, a minimum of two directors are needed for a private limited company. The maximum members can be 200. You can register as a one person company, if you are the sole owner of the company.
These documents contain the rules, vision and mission of your organisation, and define, among other things, the exact business and the roles and responsibilities of shareholders and directors
Yes, for sure. You can become the director of any type of company. But you need to go through the employment rules and make sure they allow you to do so.
You are only responsible for the extent of your investment in the company. Personal assets are not procured in the case of bankruptcy.
Of course. A private Limited Company is eligible to make FDIs in India.
Multiple compliances need to be fulfilled by a private company and these are:
• The company must appoint an auditor.
• The company should conduct at least one AGM (Annual General Meeting) and at least 4 board meetings (one in each quarter).
• An auditor must audit the books of the company
• Furthermore, a company shall fill the form AOC-4 and MGT-7 as a part of annual compliance within the specified time frame.
• There should be the annual filing of the ITR and registrar of the companies
Yes, a Private Limited Company must hire an auditor, no matter what its revenues. In fact, an auditor must be appointed within 30 days of incorporation. Compliance is important with a private limited company, given that penalties for non-compliance can run into lakhs of rupees and even lead to the blacklisting of directors.
Yes, a NRI or a foreign national can become a director of a private limited company. He or she must obtain a DIN from the Indian RoC. They can also hold a controlling stake in the company. As long as at least one director on the board of directors is an Indian resident.
We can convert proprietorship into private limited company typically in 14-20 days. The time taken also depends on relevant documents provided by the applicant and speed of approvals from government. To ensure speedy registration, please pick a unique name for the proposed Company and make sure you have all the required documents ready, prior to starting the registration process.