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Private Limited

What Is the Process for Forming a Pvt Ltd From Proprietorship

As a business grows, the demands of the market and the disadvantages of a proprietorship may force a business owner to initiate the process of transferring ownership into a PVT company.

A Pvt ltd company has significant advantages over other types of business ownership, such as limited liability, the ability to attract fair funding, a consistent presence, and so on. In this article, we’ll look at the requirements and procedures for transforming a Pvt Ltd Company from a sole proprietorship.

Conditions for Transforming a Proprietorship into Pvt Company

  • For the transformation to take place, an agreement must be made between the sole owner and the Pvt ltd company
  • The Pvt ltd company’s memorandum of association (MoA) should include a line that says – ‘An acquisition of a sole proprietorship’
  • In addition, all of the benefits and liabilities of the sole proprietorship must be transferred to the pvt ltd
  • The sole owner should be a voting member of the organization’s directorial board. In any case, the directional board is half the size of the organization. It is important to remember that a private limited must have at least two directors
  • Moreover, the integration principles make it mandatory that the minimum share capital of a pvt ltd company be ₹1,00,000.

Procedure for Transforming a proprietorship to a Pvt ltd company

The Companies Act of 2013 and the Income Tax Act of 1961 govern the conversion of a sole proprietorship firm to a private limited company. sole proprietorship transformation can be accomplished by following the processes outlined below:

  • The director identification number (DIN) and the digital signature certificate (DSC) must be obtained for all the directors
  • Obtaining approval to name the corporation, which must be requested in Form-1
  • Prepare the company’s MoA and AoA which outlines the company’s objectives and policies
  • Make an application to the MCA for the establishment of the company
  • The slump sale formalities must be completed by the proprietor
  • Submit all the necessary documents
  • You will be issued a certificate of incorporation.

Documents Required for Transformation

  • PAN card copy of all directors (identity proof)
  • Copy of Aadhaar card/voter ID (address proof)
  • Passport-size photographs of directors
  • Proof of ownership of a business place (if owned)
  • Rental agreement if rented
  • No objection certificate (NOC) of the landlord
  • Electricity or water bill.

The Following Forms Must Be Submitted to the MCA:

  • Form 1 must be filed with the MoA, AoA, and other documents and Form 18 specifies the details of the registered office
  • Form 32 contains particulars of the information of the directors.

Forming a Pvt ltd Company: Prerequisites

To change a sole proprietorship into a Pvt ltd, first, get registration of company online, then take over the sole proprietorship via a memorandum of association (MoA) and transfer all assets and liabilities to the Pvt ltd. As a result, before applying for a certificate of incorporation, the following prerequisites must be met.

  1. Minimum of two directors and DIN for all the directors
  2. Minimum of two shareholders
  3. The minimum share capital of ₹1 lakh.

In addition, the sole proprietorship will be required to officially close down. The sole proprietorship’s use of any licenses or tax registrations can then be canceled or submitted to the authorities. As a result, the government should be notified of the closure. 


This entire procedure is believed to be dreadful. Transformation involves registering a company as a whole, then providing further documents to finalize the acquisition, and ultimately ending the sole proprietorship. As a result, transforming a sole proprietorship to a Pvt ltd company is regarded as a time-consuming process. Vakilsearch, on the other hand, can make this process much easier and faster for you. Get in touch with our experts now!

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