There is no such provisions given in Companies act 2013 to convert Sole proprietorship into Private Limited Company or take-over of Sole Proprietorship by Private Limited Company. You are running your proprietorship firm which is not governed by any law. If you are filing Income tax return for sole proprietorship firm and you want to grow your business, then it is good to recommend you for converting it into Private Limited Company. Though there is no specific provision given under Companies Act, 1956 and Companies Act, 2013 for conversion of Proprietorship firm into Private Limited Company, but as a normal practice, the proprietorship firm being takeover by new Private Limited Company. You can follow the procedure as stated below for converting sole proprietorship business into Pvt. Ltd. company.
To form a private limited company from a sole proprietorship, the procedure is to first form the private limited company and then take over the sole proprietorship through a Memorandum Of Association (MoA) and transfer all benefits and liabilities to the limited company.
- Determine the selling price. Estimate the total value of the business based on forward earnings. …
- Find a buyer. …
- Negotiate with potential buyers. …
- Review offers. …
- Create a sales agreement. …
- Transfer assets.