Procedure for Conversion of Sole Proprietorship to Private Limited Company

• After incorporating a new private limited company, all the assets and liabilities of the old sole proprietorship will be completely transferred to the incorporating company.
• Even after the conversion takes place, the old sole proprietorship will hold 50% of the shares in a new private limited company. i.e., 50% of the voting rights will be held by a sole proprietor.
• The old sole proprietor will hold shares for a minimum period of 5 years from the date of Incorporation of a new private limited company.
• Similarly, there will not be any monetary consideration between a sole proprietorship and a private limited company as it is a mere conversion, not a sale.

Steps to be followed for converting a sole proprietorship to Private Limited Company:

• The sole proprietor should complete all the steps related to the slump sale formalities.
• The sole proprietor should obtain the DIN and DSC for all the persons going o be directors of the company to be incorporated.
• Application to be made for checking the availability of name for the new private company.
• The sole proprietor should then draft the MOA and AOA of the new Private Limited Company. In MOA, he must add one objective stating that the sole proprietorship has been taken over by the company.
• The sole proprietor should then apply online for Company Registration from the Ministry of Corporate Affairs online portal.
• All the documents should be submitted along with the application form.
• Then the applicant should secure the Certificate of Incorporation from the Registrar of Companies.
• The applicant should then apply for PAN and TAN numbers from the authorized authority.
• At last, the bank accounts of the private limited company should be updated for carrying out transactions.