Khushboo Maheshwari (Company Secretary) (548 Points)
15 May 2012Can anyone please tell in detail what are the plus and minus points of converting a proprietorship concern into a private limited company?
Thanks
CA Ganesh Agarwala
(Audit Senior Manager)
(239 Points)
Replied 15 May 2012
dear khushboo,
as you know in case of sole proprietorship business there is unlimited liability but in case of liability of the shareholder is limited upto the capital he subscribed for.....
this is the most important advantage.
cheers
ganesh agarwala
Pathik
(.)
(83 Points)
Replied 15 May 2012
Some of Practical benefits of converting proprietorship into Private Limited Company are :
- Legal recognition in the eyes of law so more credibility in the market both for suppliers and customers.
- Advantage goes to company if want to borrow funds from bank rather than a proprietor borrowing money from bank.
- Tenders and other such places in many industries require Private limited and they prefer Private limited over proprietorship
- If turnover is on increasing side its always better to have private limited from the point of view of revenue departments. Generally proprietorship concerns come under scanner more often than companies.
And some of Few disadvantages of having a company :
- More tax slab rates hence more Income tax.
- More formalities both with ROC and Income tax Department. So even if company is not having good business intially it has to bear those expenses.
- Company Law attracts so have to take care provisons of Company law. Specially in the matters of Loans etc.
Thank You.
CAclubindia
