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conversion of partnership firm into private limited company

Satish Kavitake (389 Points)

10 November 2018

hello

pl advise whether partnership firm can be converted into private limited company

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8 Replies

Vibha Trivedi (437 Points)
Replied 10 November 2018

Yes, a partnership firm can be converted into private limited company.

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Satish Kavitake (389 Points)
Replied 10 November 2018

what is the procedure for the conversion

Vibha Trivedi (437 Points)
Replied 10 November 2018

Section 366 of the Companies Act, 2013 is followed for the same.But for this, under current scenario there has to be minimum seven partners in the partnership firm. This requirement is proposed to be reduced to minimum two members but the related sections are not yet notified.

For conversion under Section 366, various forms along with the procedural requirements are filed with ROC which are RUN Form for name approval of company, URC 1,INC 32, INC 33, INC 34 along with required documents. Newspaper advertisrment in Form URC 2 as prescribed also to be published.

In case the partnership firm is not eligible for conversion under section 366 of the Companies Act, 2013, then there is another method which is dissolving the firm and on dissolution taking over of the firm's business by the company. Realisation Account has to be prepared, Purchase Consideration is worked out, shares are allotted to partners in the company in consideration of purchase, among other things.

Satish Kavitake (389 Points)
Replied 15 November 2018

thanks, what will be income tax treatment in both the cases

Vibha Trivedi (437 Points)
Replied 15 November 2018

Under Section 366 conversion there is no capital gains tax attracted.

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abhishek kadam (Self employed) (151 Points)
Replied 01 January 2020

Dear Vibha Madam,

Thanking you for sharing this. Also can you please elaborate what about the Stamp Duty in case of conversion of Registered Partnership Firm into Private Limited Company and how it is calculated.

Thanking you in advance.

Best Regards,

Abhishek