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  • Separate legal entity that a Partnership firm does not have
  • Private Limited Company has Limited Liability whereas in the case of partnership firm partners are personally liable for each and every Debt
  • Perpetual Succession/Uninterrupted Existence
  • Easier Fund Raising
  • Builds Credibility
  • More Organised and Structured way of doing the Business
  • Conversion of a firm into a company is not a transfer and would not be subject to capital gains tax
Conversion of Partnership Firm into Private Limited Company (PLC)

Pre-requisites to Convert Partnership Firm to PLC

  • Should have 2 or more partners
  • All the assets and the liability of the partnership becomes the assets and the liability of the newly formed private limited company
  • All partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion
  • NOC from all secured creditors
  • Amend Partnership deed – Add clause for conversion in deed, if required

Steps to convert Partnership Firm into PLC

  • Hold a meeting for the Conversion of Partnership Firm Into Private Limited Company.
  • Written Consent or NOC from the Secured Creditors of the Firm, if any.
  • Apply for DSC and DIN for all directors and shareholders of the company.
  • Obtain name Approval in RUN on the MCA Website.
  • File Form URC-1 along with the necessary attachments with ROC.
  • Publish an advertisement in Two Newspapers and shall be in Form No. URC-2.
  • File necessary forms with ROC – INC 32, INC 33, INC 34 & AGILE on MCA Website.
  • PAN & TAN Application – mandatory to mention PAN & TAN Details in INC-32 Form.
  • GST Registration (Optional)
  • Draft MOA and AOA
  • Once the Registrar in satisfied he shall issue Certificate of Incorporation in Form No. INC-11.

List of documents to be attached

With Form URC-1

  • A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them.
  • Also, a list of persons proposed as the first directors of the company.
  • An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under section 164(1).
  • Partnership deed, along with the revised deeds, in case the firm is regd.
  • A statement of assets and liabilities of the partnership firm duly certified by a chartered accountant.
  • Further, a copy of the latest income tax return of the Partnership Firm.
  • A statement specifying the following particulars:
  • The nominal share capital of the company and the division of shares.
  • The number of shares taken and the amount paid on each share.

With Forms INC-32, INC-33, INC-34

  • DIR-2 Consent to Act as a Director.
  • KYC document of Directors and shareholders of the proposed converted company.
  • Utility Bill (not older than two months).
  • Lease deed/ title deed for the regd. office address of the company.
  • Detail of main and other objects of the company.

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Category Corporate Law, Other Articles by - CA. Aditya Goel