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Conversion of Business to Company
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Convert your Business to Company
Converting an existing business into a company:
The MCA has issued the Companies (Authorized to Register) Second Amendment Rules, 2018 (‘Amendment Rules’) via a notification dated 5 July 2018. The Amendment above Rules shall also go into effect on August 15, 2018.
The section (section 366) addresses the registration of unregistered entities, such as partnership firms, limited liability partnerships (LLPs), cooperative societies, and similar entities, as companies under the 2013 Act. The amendment allows entities with two or more members to register under the 2013 Act as either a company limited by guarantee, a company limited by shares, or an unlimited company.
Conversion into a company is now possible with two members under the Companies Act of 2013:
Beginning on August 15, 2018, unregistered companies with two or more members, such as LLPs, partnership firms, societies, etc., may choose to convert into a company limited by guarantee or unlimited liability by the provisions of Part XXI of the Act, 2013.
Why Existing Businesses Become Corporations:
Section 366 of the Companies Act, 2013 permits any Society, Trust, Firm, Partnership Firm, Limited Liability Partnership, Co-operative Society, or other business entity formed under any other law to convert into a company. The following requirements must be met to convert to a company:
- Better Legal Recognition:The Society's or Trust's or other entity's goodwill and brand value are preserved, and the entity continues to enjoy its previous success, thanks to better legal recognition.
- Limited Liability: Upon converting a Society, Trust, or other entity into a Corporation, the Society, Trust, or other entity may enjoy the benefits of Limited Liability protection for its members.
- No stamp tax Implications: All of the firm's movable and immovable properties automatically vest in the company. There is no need to execute a transfer document; therefore, no stamp duty is required. Section 3 of the Indian Stamp Act of 1899 stipulates that Stamp Duty must be paid on the transfer of property or conveyance. Upon conversion into a corporation, the mere vesting of property does not constitute a transfer or conveyance, so no Stamp Duty is due.
- Separate Legal Entity:The company members may come and go, but the company itself cannot, indicating that the members and the company are distinct legal entities. The company can own and sell assets in its name, sue, and be sued in a court of law. By converting to a corporation, the entity can acquire the status of a separate legal entity.
- No Capital Gains Tax: No Capital Gains tax is imposed on transferring property from a Corporation, Trust, or other entity into a Company.
- Losses to be carried forward, offset, and unabsorbed depreciation: The firm's accumulated loss and unabsorbed depreciation are treated as loss/ depreciation of the successor company for the prior year in which the conversion was completed. Thus, such a loss may be carried forward by the successor company for an additional eight years.
- Transfer of Assets and Liabilities:The firm should immediately transfer all assets and liabilities before the conversion is automatically transferred to the company.
Who can convert to the company?
- Any Partnership Company
- LLP.
- Society.
- Trust.
- Co-operative Society.
- Any other business entity formed pursuant to a law currently in effect.
Who cannot be transformed into a Company:
The following entities cannot become companies:
- A corporation that is already registered under the Companies Act of 1956, the Indian Companies Act of 1882, or the Indian Companies Act of 1913 is exempt from this section's registration requirements.
- A company whose members' liability is limited by any Act of Parliament other than this Act or any other law in force shall not register as an unlimited company or a company limited by guarantee under this section.
Requirements for transforming a Society, Trust, or Other Entity into a Corporation:
Section 366 of the Companies Act, 2013 permits any Society, Trust, Firm, Partnership Firm, Limited Liability Partnership, Co-operative Society, or other business entity formed under any other law to convert into a company.Â
The following requirements must be met to convert to a company:
- There must be a minimum of two members to form this company.
- Details regarding the members/partners and therefore the shares they hold must be provided.
- Provide a press release from two or more directors verifying the particulars of all members/partners.
- Provide affidavits from all members/partners so as to dissolve the entity.
- Provide a replica of the document constituting or regulating the entity.
- Provide a replica of the newspaper advertisement.
- To be provided may be a certificate from a CA/CS/CWA attesting compliance with all applicable Stamp Act provisions.
- The consent of three-quarters of the bulk is required.
- The provision of a no objection certificate/consent from secured creditors.
- Statement of accounts of the prevailing entity, prepared within 15 days before the date of application and duly attested by an auditor.
- The proposed directors must guarantee compliance with the wants of the Indian Stamp Act of 1899.
- A copy of the company's most recent Income Tax Return must be provided.
- Two or more members' identification and address must be provided.
Notes:
- If a society or trust intends to register as a company under section 366 of the Act, which is registered under section 12A of the Income Tax Act, 1961 (43 of 1961) for claiming exemption on income, an intimation shall be sent to the Income-tax authorities, and proof of its service shall be attached to form No. URC-1.
- No application for conversion into a company of any other kind, other than a conversion from a private company to a public company or vice versa, may be made for ten years after a society or trust has been registered as a company under the Act.
- A trust may not apply for registration as a corporation under the Act while a proceeding under section 92 of the Code of Civil Procedure is pending.
- A commitment from all the members, partners, or trustees that, in the event that a company is registered under Part I of Chapter XXI of the Act, the necessary papers or documents will be submitted to the registering or other authority with which the company was previously registered, in order to effect the dissolution of the company.
Process of Conversion in Steps:
Why Business Setup in India?
Since our inception as an Official Company Registration Agent, we have maintained close ties with the Ministry of Corporate Affairs, Government of India. From day one, our intention has been to offer a streamlined incorporation procedure that is quick and easy to utilize. Today, our system for company registration is among the most efficient and effective in India. You can file an application for a new company name in slightly more than 5 minutes, and your firm will often be fully registered within 3-5 days. In addition to maintaining affordable pricing for company formation, we are constantly investigating new ways to bring value to our clients. We are proud to be one of the least expensive ways to establish a business in India.
We have the knowledge to advise clients on the appropriate company structure to implement. The majority of our clients want assistance registering a business limited by shares. The limited company structure is prevalent because it permits the distribution of profits to shareholders while safeguarding them through restricted liability. Our team has more than 2 decades of experience founding companies and providing corporate and secretarial services, which aids in the growth of tens of thousands of our clients’ enterprises each year.
We are tremendously passionate about the quality of our service, and we are incredibly proud of the reviews we get from our customers, as evidenced by our outstanding reviews and ratings. Continually, our team is chosen due to the value and skill for which it is renowned. We have helped form the industry by giving our customers innovative business services and packaged solutions that have grown alongside their demands.
Our clients have access to complimentary help from a team of experts. We are always prepared to assist. Throughout the registration of your Company, you will be enabled to contact us by phone or email if you require assistance.
No Hidden Charges
We believe in transparent and straightforward pricing. The price displayed is the price paid. There are no additional fees associated with business registration.
Rapid Service
You can file an application for a new company name in slightly more than 5 minutes, and your firm will often be fully registered within 3-5 days.
20 Years of Expertise
Our staff has over 2 decades of experience, making us specialists in our industry. Take the stress out of establishing your business, and rest easy knowing you have the assistance you need to thrive.
Reliable Service
Today, our customers expect exceptional service. Because of this, we are very pleased that 99 percent of our customers have rated us as "Great" or "Excellent" on Google.
Simplicity
The entire procedure, from ordering to utilizing your company registration license, is designed to be as simple and direct as possible to aid in the growth of your firm.
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ustomer confidentiality and safety come first. We safeguard your financial, business, and personal information to the utmost degree.
Let's Deal With Your Confusions
DIN is the abbreviation for Director Identification Number. Following the incorporation of the Company, every director will be assigned a unique Director Identification Number. With this DIN, he or she can register an unlimited number of businesses.
A DIN holder is required to submit his KYC to the MCA annually by the 30th of September or face a penalty of Rs. 5,000/-.
DSC is an abbreviation for Digital Signature Certificate. Shareholders must possess a Class-III Digital Signature Certificate in order to register their organization.
There are various organizations that issue Class-III DSCs. These organizations are referred to as DSC Certifying Authorities. We have formed a partnership with eMudhra Tamil Nadu. eMudhra is one of India's most prominent Digital Signature Certifying Authorities.
Approved share capital is the maximum amount of capital that shareholders are permitted to invest in the Company. In actuality, this is the permitted investment limit for Equity Share Capital.
Paid-up share capital is the amount of money shareholders deposit into the Company's bank account towards share capital.
Now, a business can be registered with a minimum share capital of Rs. 2/-or investment of Rs. 1/- from each shareholder.
A CIN is an identification number assigned to a company by the Ministry of Corporate Affairs when they are issued the Certificate of Incorporation.
It might serve as the Company's identification number.
If we apply for direct incorporation without a Certificate of Name Availability, the process could take between three and five business days. Occasionally, it can be implemented in a single day.
However, it is recommended to apply for a company name before incorporation, which may take between 10 and 15 days.
Yes!
No, you cannot register a company on your own since Professionals such as a Company Secretary or a Chartered Accountant must digitally sign the application forms alongside a Director before your Company can be registered.
Including Digital Signature Certificates, the total government fee for a one million authorized share capital company would be approximately Rs. 4,000.
XYZ is authorized by the Ministry of Corporate Affairs to provide company registration services at an affordable price of Rs. 1,999/- throughout India.
For a two-person private limited company, the minimum share capital is Rs. 2/-, while for a one-person private limited company, the minimum share capital is Rs.
2 in the case of two people- private limited company and 1 for one person private limited company.
At Business Setup in India, we simplify the process of starting and running a successful business. Our expert team offers comprehensive services, from legal support to accounting and business advisory, tailored to meet the needs of entrepreneurs and companies.
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