Procedure for Conversion of Partnership Firm into Private Limited Company

Conversion of Partnership firm into a Private Limited Company is a good option for anyone who wishes to expand small and medium scale enterprises to a large scale one, or for infusion of equity capital.

Benefits of Conversion:

• Limited liability of directors as compare to partnership firm
• Easy access to funds i.e. Borrowing for expansion from Banks and financial institutions
• Increase Capital base of company
• Transferability of shares i.e easier changes and alterations in shareholding and also issue share capital by many ways as per rule of companies law,2013
• No capital gain tax on transfer of property from partnership firm to Private Limited Company
• No stamp duty on transfer of property from partnership firm to Private Limited Company
• As per income tax point of view i.e loss and unabsorbed depreciation of firm now as loss/depreciation of the proposed company and this loss can be carried for next 8 years of the proposed company.

Law applicability:

• Section 366 to 374 of Companies Law, 2013
• Company Incorporation Rules ,2014

                         

For Conversion of Partnership Firm into Private Limited Company:

• Hold meeting of partners to take their mutual consent for conversion and to authorize 2 or more partners to execute all required step for conversion
• Capital which was as contribution of partners divided into units
• Apply for Name Approval through RUN and upload required documents with the registrar of Companies within 20 days from the date of name approval.
• Publish an Advertisement in Two Newspaper (English & Vernacular) in Form URC – 2 within 21 days from the date of publication of this notice.
• Form URC -1 conversion form with necessary documents within 30 days of name approval.
• Form – 22 verification of registered office within 30 days of Incorporation.
• File Incorporation forms through SPICE+ with PAN, TAN and GSTIN (AGILE) and MOA and AOA in single window (See new notification for the same)
• File E-form INC – 7 (Application for Incorporation) for giving details about all directors and subscribers of the converted company.
• Declaration by Professional – E form INC -8 {as attachment of INC -7}
• Required E-form INC -9 (Affidavit from the Subscribers) {as attachment of INC -7}
• File E-Form DIR -12 (Appointment of First Directors)
• NOC from the owner of the property.
• Proof of Office address (Lease deed/ Rent Agreement)
• Copy of the utility bills (not older than two months)

Attachments for Form URC-1:

• SRN of RUN i.e. name approval form already filled to ROC
• Particulars of Partners and Shares held by them;
• Affidavit duly notarized from all the partners for dissolution of the firm ;
• Declaration by 2 directors i.e. DIR -2 ;
• Copy of the Partnership deed with all revised deeds till date ;
• Copy of Newspaper advertisement i.e URC -2 ;
• Certificate from a CA/CS/CWA certifying the compliance with all the provisions as applicable for this conversion
• A copy of latest IT return;

Important Notes:

• After conversion apply for all changes in name from Firm to Private limited company like sign board , letterheads also in government and non-government authorities