How to convert proprietorship firm into a pvt. ltd. company?

821 votes

Dear Sir/Ma'am

I would like to inform you that there is no legal provision for converting a proprietor firm into a company. you have to form a new company only in which the proprieter can have decided percentage of shares .
You also have to get into a new contract with your clients fir the work orders to be interes in the name of your company.
Regards
Tarundeep Singh
(CS, LLB)

Advocate Tarundeep Singh LawRato

860 votes

For the purpose of conversion of your firm to a private ltd company first of all check the name availability i.e. whether the same name as that of your proprietorship firm is available for pvt. ltd. co.
If yes then follow the procedural requirements for converting it into pvt. ltd. co.
If no then choose another name for your pvt. ltd. co.
Also include in your memorandum one of objectives to take over the old proprietorship concern with all its assets & liabilities including goodwill & intellectual property rights, if any.
Be sure that the proprietor of the old firm is a majority share holder in the new company which in your case is already.
Chalk out a detailed take over agreement along with required affidavits.
For your existing work orders talk to the companies for which you are working / may work
and ask them their procedural / documentation / requirements for this purpose and fulfill the same as required by them.
you can talk to them in advance so as to include their procedural requirements prior to conversion.
You can convince your clients / future clients in doubt with proper display of required information / logo at your website / letter heads / visiting cards by using the words formerly .....

Advocate Bhupinder Kumar Jerath LawRato

771 votes

To convert the proprietary to Pvt Ltd company it needs to incorporate such a new company for the sale of business. The newly Incorporated Pvt Ltd company must one of the objectives to take over. Then it can take over the proprietary concern.
It has different stages to get conversion

Advocate Goutam Bhol LawRato

540 votes

The answer to your question will depend on the kind of work or project you wish to bid for. All projects/ RFPs/ work orders have varying terms. In case the bid/ WO conditions allow room for the past credentials of the shareholders/ promoters (i.e., proprietor), then you would be on a safe ground. You should also carry out your restructuring keeping these eventualities in mind. I would be happy to help.

Advocate Joydeep Nath LawRato

627 votes

You cannot convert your proprietorship into a pvt. ltd. company, you will have to create a new private limited company which will be a separate entity from the proprietorship firm. Since the proprietor will be a 90 percent shareholder, it is likely that the experience will be considered. Also the partnership can transfer the goodwill and experience of the existing business to the new private limited company and thus it will help you use the existing credentials like work orders for bidding after conversion. If the client denies to accept the past experience, you may try to convince him through the transfer of business deed between the partnership and the private limited company, by the virtue of which all the business, experience and goodwill be now considered to be that of the company. In case, you are still comofortable, we can also consider converting your partnership into a limited liability partnership (LLP) after looking at the facts of your case.
To get a detailed advise, more facts such as the nature of business and purpose of conversion of the proprietorship etc will be required.

Advocate Tahir Ashraf Siddiqui LawRato