Conversion of Company from One Form to Another
In the modern days the need & speed for expansion has been growing tremendously which leads to fast evolving change in the nature of company status to adapt the required needs and move ahead of the constraints in existing one. So here we shall be knowing about the types of conversion possibilities currently as per the Indian Taxation and Government Laws for the time being.
Partnership Firm to L.L.P.
After introducing the LLP Act in 2008, many Partnership Firms have started to convert their Partnership Firm to LLP. The reasons for conversion are self-evident, such as the ability to take an unlimited number of partners, separate legal entities, limited liability and easy process of ownership transfer by simply filling a form. Due to all of these advantages of LLP over Partnership, LLP has become very popular amongst small and medium-sized businesses.
The Partnership Firm that is willing to convert itself to LLP must be registered under the Indian Partnership Act, 1932. Unlike these, Unregistered Firms can’t be converted to an LLP. All converted LLP from Partnership Firm must have same partners as in earlier entity Partnership Firm. So we at Taxaj suggest our clients retire Partners who do not wish to be a part of LLP, and if new partners are to be added, they should be added after the incorporation of LLP.
Proprietorship to Pvt Ltd Company
The most popular form of business entity that most Indians launch their business with is Sole Proprietorship due to the minimal compliance requirements & documentations. As the business and the incomes grow, you need to open a business with current accounts and income tax filings of the Proprietor. Once you know you are booming and there is only an uphill to go, then you can convert Sole Proprietorship into a Private Limited Company to accomplish this separation.
To convert a Sole Proprietorship into a Private Limited Company, an agreement is generally drafted between the Proprietorship and the Private Limited Company (once it is incorporated) to sell the business. Further, such Private Limited Company so incorporated should takeover the Sole Proprietorship Concern” as one of the objectives in its Memorandum of Association.
OPC to Pvt Ltd Company
Section 18 of the Companies Act, 2013 & Provisions of Companies (Incorporation) Rules of 2014 discharges the rules and guidelines for converting an OPC into a Private Limited Company. It will not affect the assets, liabilities, debts, obligations or any running contracts of the OPC. You can convert an OPC into a private limited company in two ways, either voluntarily or mandatorily. Here, the MOA and AOA of the OPC should be altered as per new standards.
You must obtain NOC from the concerned members and creditors in written form; passing a resolution in support of conversion; must satisfy the minimum number of members and directors, i.e. two members and two directors at a minimum.
L.L.P. to Pvt Ltd Company
A lot of businesses started in India as Limited Liability Partnership (LLP) are now willing to convert into a private limited company for certain more advantages that a Pvt Ltd company enjoys. Most prominent among them being the ease of infusing equity capital. An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules, 2014.
However, various requirements need to be satisfied for converting an LLP into a Private Limited Company. Partners approval is required. Advertisement in a newspaper is to be done in a local and a national newspaper. A No Objection Certificate (NOC) is required from the ROC where such LLP is registered. Then all the incorporation process has to be undertaken which includes: