For many thriving businesses in India, a partnership firm serves as the perfect launchpad. It is easy to set up and operates with minimal compliance. However, as your business grows, the limitations of a partnership—such as unlimited liability and challenges in raising capital—can become significant hurdles.
That is where conversion of partnership firm into a private limited company becomes a significant move and a way ahead. It is a transformative step that offers a new horizon of growth, credibility and protection. While the process may seem complex, a trusted partner like Praman Advisors Private Limited can make the transition seamless and hassle-free.
1. Overview:
Converting a partnership firm into a private limited company is a legal process which is governed by the Companies Act, 2013. This change in legal structure is not merely a formality; it is a fundamental shift that empowers your business to scale new heights. By converting, you give your business a separate legal identity, much like a person, capable of owning assets, incurring debts and entering into contracts in it’s own name.
Praman Advisors, a leading legal tech firm, specializes in this very transformation. Leveraging cutting-edge AI and a team of seasoned professionals including CAs, CSs and lawyers, they simplify the intricate legal and procedural requirements. Their innovative approach ensures your business conversion is efficient, accurate and fully compliant, allowing you to focus on your core operations.
2. Key Benefits of Conversion:
Converting your partnership into a private limited company offers a host of significant advantages that are crucial for long-term business success:-
- Limited Liability: This is perhaps the most compelling benefit. As a private limited company, your personal assets as a director or shareholder are protected from the company's debts and liabilities. Your financial risk is limited to the amount of capital you've invested in the company.
- Perpetual Succession: Unlike a partnership firm which can dissolve upon the death, retirement or insolvency of a partner, the private limited company has an unlimited lifespan. The company continues to exist regardless of any changes in it’s directors or shareholders, ensuring business continuity.
- Enhanced Credibility: A private limited company is viewed as a more credible and stable business entity. This improves your reputation in the eyes of customers, suppliers and financial institutions, making it easier to attract new business and secure partnerships.
- Easier Access to Funding: Private limited companies are the preferred structure for banks, venture capitalists and angel investors. The ability to issue shares makes it significantly easier to raise equity capital for expansion and growth, a feat that is nearly impossible for a partnership firm.
- No Capital Gains Tax or Stamp Duty: Under specific conditions, the conversion of assets from the partnership to the new company is exempt from capital gains tax and stamp duty, providing a major financial relief during the transition.
- Ability to Carry Forward Losses: The accumulated losses and unabsorbed depreciation of the partnership firm can be carried forward and set off against the profits of the newly formed company for up to eight years, offering a crucial tax benefit.
3. Documents Required for Conversion:
The process for conversion needs systematic submission of documents to the office of the Registrar of Companies (ROC). Praman Advisors provides a comprehensive checklist and assists you in compiling and verifying every single document. The general list of documents includes:-
- From the Partnership Firm:
- Certified true copy of the Partnership Deed.
- Certified copy of the firm’s latest balance sheet and Income Tax Return.
- No Objection Certificate (NOC) from all secured creditors.
- Consent of all partners for the conversion.
- From Proposed Directors/Shareholders:
- PAN Card and Aadhar Card of all partners who will become directors and shareholders.
- Proof of identity and address (e.g. Voter ID, Passport, Driving License, Bank Statement, Utility Bill).
- Latest passport-sized photographs.
- For the New Company:
- Proof of the registered office address (e.g. rent agreement, utility bill).
- Copies of the newspaper advertisements published.
- Draft Memorandum of Association (MoA) and Articles of Association (AoA).
- Affidavits and declarations from all proposed directors.
4. Process to Apply with Praman Advisors:
Praman Advisors’ tech-driven platform and expert guidance transform the tedious conversion process into a smooth journey. Here is a simplified overview of how they manage the process for you:-
- Initial Consultation: The process begins with a free consultation to understand your business and specific requirements. Praman Advisors' experts will guide you on the necessary pre-conversion steps.
- Document Collection & Verification: You will be provided with a simple checklist to upload all the required documents onto their secure platform. Our team verifies the documents and identifies any discrepancies.
- Name Approval & Advertisement: Praman Advisors files the application for the company name and handles the publication of the mandatory newspaper advertisements in one English and one vernacular newspaper to invite any objections.
- Application Filing: With their deep knowledge of MCA regulations, the team drafts and files the necessary forms (like URC-1, SPICe+ Part A & B) along with all the supporting documents.
- Follow-up & Compliance: The Praman Advisors team diligently follows up with the ROC to ensure a quick approval. They address any queries from the authorities promptly and accurately.
- Certificate of Incorporation: Upon successful verification, the ROC issues the Certificate of Incorporation which officially marks your firm's conversion into a private limited company. Praman Advisors also assists with post-conversion formalities like updating your PAN/TAN and informing the Registrar of Firms.
5. Fees and Timelines:
Fees:
The total cost for the conversion of a partnership to a private limited company comprises two components:-
- Government Fees: These include stamp duty, ROC filing fees and the cost of newspaper advertisements. These fees are statutory and vary based on the authorized capital of the company and the state of registration.
- Professional Fees: This is the fee for the expert services provided by a firm like Praman Advisors, covering document preparation, filing, follow-ups and legal advice.
Please contact us for a personalized quote:-
-
- Manju Laur: 📞 +97119 94042
Timeline:
The timeline for conversion is typically 15-20 working days, provided all documents are in order and there are no objections. Praman Advisors’ efficient processes and technology are designed to complete the process within the quickest possible time frame.
