CONVERSION OF PARTNERSHIP FIRM INTO PRIVATE LIMITED COMPANY
Transformation of Partnership firm into a Private Limited Company is a decent decision for the businessman who wishes to develop micro, small and medium scale business to a large scale one for raising of equity capital in the business. Owning a legal entity is the necessity of the hour. The whole world is progressively drifting towards one international market without any trade barricades between the countries worldwide. With the development of business work culture and promotional startup benefits, a huge mass of business persons are looking forward to corporatization.
Conversion of Partnership firm into the private company is to comply with other requirements such as securing approval from all partners and secured creditors for such conversion, a notice in the newspaper to be issued in one English and one regional language seeking oppositions from the general public and finally followed by the incorporation process of Private Limited Company.
One more alternative opportunity available to the associates is to set up a separate Private Limited Company and then get the whole business of Partnership Firm shifted to the company through a written agreement under which the cited requirements such as the requirement for having minimum two partners, newspaper advertisement, etc. are not required to be done but may attract stamp duty on transfer of property through takeover agreement and may vary in different conditions.
The requirement to convert the partnership firm into a Private Limited company
Before converting the following requirement should be fulfilled:
- Partnership firm should be registered with minimum of 2 or more Partners.
- Minimum share capital shall be Rs. 1,00,000
- Partnership deed must include the provision of converting the firm into Company.
- There must be a contract between the partners to convert the firm into Company.
- Partnership deed will be amended if the above requirement is not fulfilled in the existing partnership firm.
- Minimum 2 members and Directors. However, Directors and shareholders can be same person.
- Director Identification Number and Digital signature certificate for all the Directors.
Process of Conversion
- Hold the meeting of the shareholders
To take the consent of conversion from all the partners of the partnership firm, meeting of all the partners will be held. And there should be at least ¾ majority of the partners should be present in person.
- Approval from secured creditors of partnership firm
If there is any secured creditor in the firm then the written consent or No Objection Certificate is to be required from the secured creditors.
- Attaining the Company Name Approval in RUN
An application needs to be filed with the Registrar to attain the company name approval after conversion, along with the attachments stating the information that the partnership firm is proposed to be converted under the Companies Act, 2013.
- Publishing the Advertisement in Two Newspaper (English Daily and Regional)
Publish an advertisement in E-form URC -2 about registration in a newspaper (English daily & regional) where the registered office of the firm is situated for seeking any objection within 21 clear days from the date of publication.
At the time of registration, duly notarized affidavit filed by all the partners with the required documents or papers shall be submitted to authority with which the firm was registered earlier, for its termination as partnership firm consequent to its conversion into private limited company.
- Filing of necessary forms with Registrar
Spice 32, e-MOA, E-AOA filed with ROC for the approval of conversion and for registration of firm into the Private Limited Company along with all the compulsory attachments which lay down the fact of conversion.
- For DIN: KYC of all the directors (Pan Card, Aadhaar Card, Photo)
- News Paper Announcement in form URC – 2
- Information required for Filing Form URC – 1
SRN of RUN filed
Partnership Firm’s name
The date when partnership deed executed
Partner’s resolution date
Details of Partners and Shares held by them;
Duly notarized affidavit by all the partners for closure of the firm;
Declaration by two directors authenticating the details of the members;
Newspaper advertisement copy
Certificate from practicing professionals certifying the compliance with all the provisions of Stamp Act, to the extent applicable;
Copy of the latest Income tax return
Responsibility from Directors for compliance with requirements of Indian Stamp Act, 1899;
- Filing – Form SPICE-32, e-MOA and e-AOA
INC 9 and declaration by first subscribers and directors
Registered address proof (Rent Agreement/ Lease Deed/ NOC)
Latest utility bill not older than 2 months (Gas bill/ electricity bill/ Mobile bill)
The most important benefit of registering a private limited company is that it gives a position of a separate legal entity that a partnership firm does not have. In case of a partnership, a partner’s personal assets are attached and they would be held personally answerable for each and every debt or liability that the business suffers. Henceforth, with the growth of the business, if partners want to increase their trustworthiness and put the limited liability on its members, it is more fortunate for the partners to convert their partnership into a private limited company. Even though statutory compliance for a private limited company is greater than those of the firm, it gives the business more chances to flourish and magnify its reach. For any other related Legal and Accounting sustenance, NeuSource team is always happy to help you.
For further queries please contact us on: Email Id Swati@neusourcestartup.com and Phone Number 9540026175.
The NeuSource Startup Mind is the finest business startup consultant that offers various services of registration like Proprietorship Firm Registration, Partnership Firm Registration, LLP Registration, Company registration, GST Registration, Copyright Registration, ISO Registration Trademark registration and other FSSAI License etc.
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