In this article, we will understand what are the benefits of converting a proprietorship to a private limited company!

Convert proprietorship to pvt ltd company is a popular route these days. The proprietorship is not just one of the most common forms of a business entity but is also the simplest form to start with. The scope and independence of a proprietorship make it easier for employees to adjust as compared to other business entities. It also helps employees to get more hands-on experience in managing affairs as there is lower control over financial aspects. But having said that, as the business grows, a sole proprietorship isn’t as beneficial as a private limited. With a growth perspective in mind, one would want to convert proprietorship to pvt ltd company.

Benefits of Convert Proprietorship to Pvt ltd

Private Limited Companies are the most popular form of business organisation in India. The main advantages of a private limited company are as follows:

• Capital Expansion:

A private company has the advantage of raising funds for higher capital expansions, whereas a proprietorship is limited to the owner’s capital.

• Limited Liability:

A sole proprietor is wholly responsible for all losses and also has their personal assets attached. Nevertheless, shares or warranties restrict the liabilities in a private limited company.

• Continuity:

A sole proprietorship is dependent on the need of a single person, whereas a private limited company, established through company registration, can continue to exist even without the presence of its original owner.

Steps to Convert Your Sole Proprietorship into a Private Limited Company

• The process for forming a private limited company includes taking over the sole proprietorship through a Memorandum of Association (MoA) and transferring all benefits and liabilities to the new entity. To streamline this transition, you can register proprietorship firm online, ensuring a smooth and efficient incorporation process.
• Your new private limited company needs at least two directors, one of which can be you, the owner of the sole proprietorship. The other director can be any relative or friend
• You must have an identification number to form a private limited company, so make sure this is taken care of before applying for incorporation
• You will also need at least two shareholders in the new company, and they can be the same as the directors. You, as the owner of the sole proprietorship, will need to be one of them
• Finally, your new private limited company will need a minimum authorised capital of ₹ 1 lakh.