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Conversion of Partnership firm into a Private Limited Company is a good option for anyone who wishes to expand small and medium scale enterprises to a large scale one, or for infusion of equity capital. The major benefit of registering a Private Limited Company is that it has the status of a separate legal entity that a Partnership firm does not have. Private Limited Company has Limited Liability whereas in the case of partnership firm partners are personally liable for every debt. Private Limited structure is more transparent than other business structures. PLC has its own advantages such as Limited Liability, Perpetual Succession, easy access to funds, etc.
Convert your Partnership Firm into PLC following the procedure mentioned below.
Requirements:
Step by step guide to help you convert Partnership firm into PLC:
– To take assent of majority of its partners, not less than three-fourth of the partners should be present in person.
– To authorize two or more partners to take all steps necessary and to execute all papers, deeds, documents etc.
Obtain DSC of all directors and shareholders. In addition to that obtain written consent or No Objection Certificate from the secured creditors of the firm, if any.
File an application in RUN on the MCA website to obtain the name for the proposed company after conversion. Along with various attachments. Further also stating the proposal for conversion of the partnership firm.
File Form URC-1 within 30 days of name approval.
– As per section 374(b) of Companies Act, 2013 firm seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration.
– Seeking objections, if any within 21 clear days from the date of publication of the notice.
– The said advertisement shall be in Form No. URC-2.
– Further, these shall be published in 2 newspapers one in English and other in the principal vernacular language of the district.
Therefore, after obtaining name approval, and approval of E-FORM URC-1 from the Registrar, the applicant is required to draft the Memorandum and Articles of Association and other relevant documents necessary for incorporation.
File INC-32, INC-33, INC-34 and AGILE along with the earlier mentioned forms on MCA Website.
He shall issue a certificate of incorporation in Form No. INC.11.
Along with documents for its dissolution as a firm.
With Form URC-1
With Form_INC-32, INC-33, INC-34
Limited Liability of Owners: The liability of members/directors is limited to an extent of capital contribution agreed by the members of the company. The loss or debt of a company cannot be assigned to members even at liquidation. Further, one member is not held responsible for the actions of negligence or misconduct of any other member.
Separation of Management and Ownership: The separate ownership and management help both to focus on their potential works. The shareholders assign responsibility to directors for operating and running the company without losing control in form of voting.
Separate legal entity: A partnership is not a separate legal entity. If one of the partners dies or retires, or has to leave the firm, the partnership ceases to exist and so a new partnership has to be formed. But this is not the case of a private limited company. The private limited company is a separate legal entity hence it also provides the capacity to sue third parties.
Raising Capital: Raising Capital is easier in the Pvt. Ltd. Company as it allows the members to participate without taking on any personal accountability; unlike the general partnership where all common partners have unrestrained liability. The organization itself provides a number of ways to raise funds in the form of private equity, ESOP, and more.
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02 Aug, 2021By Admin Taxupp