CA. Aditya Goel
Quick Summary
Benefits 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 Cred
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FAQ :
Converting to a PLC provides a separate legal entity, limited liability for partners (unlike personal liability in a partnership), perpetual succession, easier fund raising, enhanced credibility, and a more organised business structure.
You need at least two partners. All assets and liabilities of the partnership will become those of the new PLC. All partners will become shareholders in proportion to their capital accounts. You'll also need No Objection Certificates (NOCs) from all secured creditors and may need to amend the partnership deed.
The process involves holding a conversion meeting, obtaining NOCs from secured creditors, applying for Director Identification Numbers (DINs) and Digital Signature Certificates (DSCs), getting name approval, filing Form URC-1 and publishing an advertisement in two newspapers (Form URC-2), filing forms INC-32, INC-33, INC-34 & AGILE, and finally, the ROC issues the Certificate of Incorporation.
Required documents include a list of members and proposed directors, an affidavit from proposed directors, the partnership deed (and revised deeds if applicable), a statement of assets and liabilities certified by a chartered accountant, a copy of the latest income tax return, and details of the company's share capital.
No, the conversion of a firm into a company is not considered a transfer and therefore is not subject to capital gains tax.
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