Conversion of partnership firm into pvt ltd co
This query is : Resolved
07 December 2015
please state procedure for conversion of partnership firm into pvt ltd company as per new companies act
07 December 2015
Converting a Partnership firm into a Private Limited Company
Corporatisation is the need of the hour. The entire world is gradually drifting towards one global market without any trade barriers between the countries. A small unincorporated organization led by few partners cannot think of growth on large scale without corporatizing itself. Corporatisation has its own advantages such as Limited Liability, Perpetual Succession, Transferability of shares, easy access to funds etc. Advantages of converting
All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
No Stamp Duty- All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
No Capital Gain Tax- No Capital Gains tax shall be charged on transfer of property from Proprietorship firm to Company.
Continuation of Brand Value- The goodwill of the Proprietorship firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.
Carry Forward and Set off Losses and Unabsorbed Depreciation- The accumulated loss and unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor company.
Mandatory Conditions
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.
The partners receive consideration only by way of allotment of shares in company and the partners 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.
Requirements
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
Process
Filing of requisite form for Conversion
Preparation of Foundation documents of the Company
Filing for name approval
Filing of Incorporation documents
Receiving certificate of incorporation
- See more at: https://taxguru.in/company-law/converting-partnership-firm-private-limited-company.html#sthash.3rfsZIPM.dpuf
Corporatisation is the need of the hour. The entire world is gradually drifting towards one global market without any trade barriers between the countries. A small unincorporated organization led by few partners cannot think of growth on large scale without corporatizing itself. Corporatisation has its own advantages such as Limited Liability, Perpetual Succession, Transferability of shares, easy access to funds etc. Advantages of converting
All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
No Stamp Duty- All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
No Capital Gain Tax- No Capital Gains tax shall be charged on transfer of property from Proprietorship firm to Company.
Continuation of Brand Value- The goodwill of the Proprietorship firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.
Carry Forward and Set off Losses and Unabsorbed Depreciation- The accumulated loss and unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor company.
Mandatory Conditions
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.
The partners receive consideration only by way of allotment of shares in company and the partners 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.
Requirements
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
Process
Filing of requisite form for Conversion
Preparation of Foundation documents of the Company
Filing for name approval
Filing of Incorporation documents
Receiving certificate of incorporation
- See more at: https://taxguru.in/company-law/converting-partnership-firm-private-limited-company.html#sthash.3rfsZIPM.dpuf
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Tax on Deemed Capital Gain
- Type of Capital Gain
- F & O PROFIT REPORTING FOR AY 2026-27
- Exiting partner in partnership firm in gst portal
- TDS _Long term Capital Gain ref.sec 214 Table 2
- Average Cost Of High Quality Diamonds
- Taxability of credit in canara bank ET & T section (NRO)
- ITR-3 File/Error Found
- Due Date Clarity
- NRI INSURANCE ADVISOR
- Applicability of Books of Account for Commission Income (Sections 194D & 194H)
- Gst on travel by air for business purposes
- Loss of interest in PF transfer from EPFO to Trust
- Seeking Advice: High Tax Shortfall on Job Switch + Let-Out House Property Loss in FY 2025-26
- TDS offline utility
- TDS on rent received on hardship compensation being rent on redevelopment of building
- Housing Society-ITR5
- TDS on Rent received on redevelopment of building
- Indian IT Portal issue in computing tax as per UK-India DTAA
- Capital Gains on sale of residential flat
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
