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Sole Proprietorship is a business entity is wholly owned and controlled by an individual, it is a good form of business for individuals who want to start small but as business grows it necessitate converting it into some greater form for greater advantages. Many opt for  choice of Private Limited Company as it give it a status of separate Legal entity also a private limited company offers significant advantages over the sole proprietorship.

In this article we will know about the process of conversation of Sole proprietorship into Private Limited Company, Private Limited Company Advantages.

It’s very important to know the various benefits of registering a private Limited Company, let’s look at some points of differences to make it clearer:

S.no Point of  Difference      Sole Proprietorship  Private Limited Company
1. Registration No Formal Registration A Private Ltd. Company is registered under Companies Act,2013
2. Legal Entity Status Does not hold any Separate Legal Entity. Hold separate Legal entity under the Companies Act, 2013
3. Transferability of shares Non Transferable Shares can be transferred
4. Liability Unlimited Limited to extend of shares
5. Members Minimum- 1 Member

Maximum – 1 Member

Minimum- 2 Member

Maximum – 200 Member

6. Taxation Owners income tax Profits are taxed at 30% plus surcharges and cess as applicable
7. Compliance Not required Annual Return, Annual Accounts required to be filed with the Registrar of Companies every year.

Process of Conversion of Sole Proprietorship into Private Limited Company:

 Every First step is Name Reservation for the proposed Company

Name Reservation can be done through “RUN”; it is a simple and easy to use web service for reserving a name for a new company.

Next: Incorporation through SPICE+ form

A Private Limited will be incorporated through SPICE+ form and Agile Pro

SPICE+ form is divided into two parts-

Part –A

  • Name Reservation of the Company

Part – B

  • Other incorporation services i.e. cover the incorporation applications after the name gets approved.

These Incorporation services include:

  • Director Identification Number(DIN)
  • Issue of TAN and PAN
  • Mandatory issue of EPFO, ESIC Registration and Professional Tax Registration in Maharashtra.
  • Opening of Bank Account for the company
  • GSTIN allotment

Documents Required:

  • Articles of Association
  • Memorandum of Association
  • Declaration by the Proposed Directors and Subscribers
  • Identity proofs / Resident Proof of the Proposed Directors
  • Address of the Registered Office (Along with Utility bills not older than two months)


  • Minimum Capital Contribution : There is no minimum capital amount, a Company should have an authorized capital of at least Rs.1 lakh
  • Through the agreements / contracts the assets of the proprietorship can be converted for private limited company and debt owning to any creditor need to be settled first.
  • A new bank account under the name of Private Limited Company to be opened , all previous bank accounts of sole-proprietorship need to be closed.
  • Filing of Annual Returns in Form MGT-7 and Annual Financial accounts statement in Form AOC-4 along with Board Report, Auditor Report with the Registrar of Company every year is required to be filed by the Private Limited Company.

After due verification of the application and documents provided the concerned ROC grant the Certificate of Incorporation (COI), which is the proof of existence of the company, wherein the date of Incorporation, Company Identification Number(CIN) and Permanent Account Number(PAN) is mentioned with the seal of the registrar.

The Company can commence the Business activity once the Certificate of Incorporation is granted, this complete the process of Incorporation of a Company.

Advantages of conversion of Sole Proprietorship into Private Limited Company.

  • Separate Legal Entity: A Private Limited Company has its existence separate from its directors and members being a legal entity, a juristic person established under the Act.
  • Taxation: Companies are required to pay Corporation tax on their taxable profits. There is a wider range of allowances and tax deductible costs that can be offset against company’s profits.
  • Borrowing capacity: there are better avenues for borrowing of funds for a company, it can issue debentures, secured as well as unsecured and banking and financial institutions prefer to render large financial assistance to the company and company enjoys avenues for borrowings of funds rather than sole proprietorship.
  • Limited Liability: In sole proprietorship owner own assets are at risk in even of any loss or failures, but in case of a company, if company in any event become insolvent or is wound up, only the assets of the company are used to clear the debts, the directors or shareholders of the company have no personal liabilities company being a separate legal entity.


Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Author- CS Aakansha Negi and can be contacted at csaakanshanegi@gmail.com


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  1. KAVITA GOEL says:

    Can you plz tell what will be the attachments of
    spice forms. will sale deed or any other documents of proprietorship to be attached with incorporation docs.

  2. Vratika says:

    Mam, Can you please elaborate how the assets and liabilities will be taken over by the Company, for example the Sole proprietorship has land worth Rs 50 Lakh in the name of the Proprietor, so will there be any sale deed or some other document executed and Stamp Duty on sale be paid in order to get it registered in the name of Company?

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July 2024