Conversion of Proprietary to Company

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Valueations .

Can anyone help me on how many shares of rs 10 each can i allot myself  if i plan to convert my existing proprietary firm to company . my company has been valued to 3 crores. so can i allot myself 30 lac  shares of 10 each ??  Will I have to pay any income tax when i convert the same ?

Replies (2)

1. Yes, you can allot 30 lakhs of shares of Rs 10 each to your self.

2. But a (pvt) company must have at least two members. Therefore issue one share to another member.

3. You need not pay tax if all the assets and liabilities of your prop. concern becomes the assets and liabilities of the company which succeeded the prop.concern; you should not receive any other consideration other than the shares from the company. Your shareholding should be not less than 50% of the total voting power.

Yes, you can allot 30 lakhs of shares of Rs 10 each to your self or you can issue shares at premium too.

You must be converting a business of sole proprietorship to Company via 47(xiv). You need not pay tax if all the assets and liabilities of your prop. concern becomes the assets and liabilities of the company which succeeded the prop.concern as the transfer is specifically considered as no transfer u/s. 47(xiv); but, whenever you sell fixed assets from company, tax will be levied on sale price less cost [considered u/s. 49(1) r.w. 47(iii)]. One important condition for making tax free transfer is that you as a proprietor should not receive any other consideration other than the shares from the company. Shares may be Equity or Preference (not mentioned in act anywhere to restrict it to Equity only). Your shareholding should be not less than 50% of the total voting power.


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