Conversion of Partnership to Private ltd co.

Most important point is that to avoid capital gain on assets transferred to company, you must take care of following points:

- All assets and liabilities of the firm immediately before the succession become the assets and liabilities of the company; a very simple point.

- All the partners of the firm immediately before the succession become the shareholders of the company and the proportion in which their capital accounts stood in the books of the firm on the date of succession remains the same; thus if any partner wants to withdraw or any person wants to be a major shareholder in new company, then they must be retired/ admitted before conversion/succession, an important point.

- The partners of the firm do not receive any consideration or benefit in any form, directly or indirectly, other than by way of allotment of shares in the company. Take care of this.

- The partners of the firm together hold not less than 50% of the total voting power in the company, and their shareholding continues in such manner for a period of 5 years from the date of succession.

Take care of these points to avoid tax on capital gain.