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How to convert partership firm into sole proprietorship?

rekha (Analyst) (30 Points)

12 April 2016

What are the steps involve in converting partnership to sole proprietorship?

Please try to reply ASAP

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4 Replies

meenakshi (trainee) (251 Points)
Replied 13 April 2016

Rekha,

This is very simple procedure.

The ongoing partnership firm is to be dissolved as per consent of the partners on the agreed terms and conditions and get NOC it should also be got agreed thereto that you shall be free to use the name of the firm for your proprietorship firm.

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Shubham Gupta (Business Consultants) (2077 Points)
Replied 13 April 2016

The Partnership firm would have to be dissolved - which can be either :-
i) through consent of all;
ii) Consent of anyone (if partnership at will);
iii)Dissolution through Court on specified grounds.

In the first case - A dissolution deed would be drafted - since you want to carry on with the business as your sole proprietorship concern - the assets/goodwill/capital remains with you, and the erstwhile partners - would be reimbursed for the same, you should also in the fitness of things - impose reasonable restrictions on them - not to interfere with the carrying on of business in future.

To start sole proprietorship business in Delhi or any where in India the Income tax PAN card, Current Bank Account in the name of the business you want to do to be operated by you as Proprietor & Registration with the Government Department where the trading business you want to do is required. In case this being service providing business the registration for service tax with revenue department will be required, similarly if this will be with regard to sale of goods the registration for the VAT will be required with the local State government. If this being operated from a shop or commercial place then registration for the Shop & commercial establishment will be required with the local state government. No such written deed necessary for the Sole Proprietorship Business as the DEED is required only in cases like Partnership firms & in this case there is only one person involved in whose sole ownership the business will be operated hence no written deed will be required as the purpose of written deed of partnership firm etc is to clearly identify the ownership rights, interests, profits & liabilities to be shared by the various partners in the partnership firm, when only one person is the owner & sole operator of the business then he or she is the only person to enjoy all rights, profits or face liabilities during his or her tenure of running the sole proprietorship business. However if any of the Government Department where the Registration of the business is required seek a written deed of the proprietorship business then one can reduce all the details with regard to the identity of the owner, the nature of business to be carried out, financial, property & other Capital the sole owner contributed, the details of bank accounts to be maintained for the business, the full details of loans or any financial advances taken for the establishment of the business, property mortgaged for this purpose & mode of repayment, nature of accounting, details of the books to be maintained for the accounts, the person/s who will be beneficiary in event of death of the sole owner etc. These are the few details which can be written down on a non-judicial stamp paper, signed by the sole properietor, witnessed by two witnesses & got attested by the Notary Public.

rekha (Analyst) (30 Points)
Replied 13 April 2016

Thanks for the reply. Do I need to change the company name? If yes, then just wanted to confirm that if I convert to sole proprietorship then registration can be done

meenakshi (trainee) (251 Points)
Replied 14 April 2016

To start sole proprietorship you require the PAN card, Current Bank Account in the name of the business you want to do to be operated by you as Proprietor & Registration with the Government Department where the trading business you want to do is required. In case this being service providing business the registration for service tax with revenue department will be required, similarly if this will be with regard to sale of goods the registration for the VAT will be required with the local State government. If it is being operated from a shop or commercial place then registration for the Shop & commercial establishment will be required with the local state government. No such written deed is necessary for the Sole Proprietorship Business. However if any of the Government Department where the Registration of the business is required seek a written deed of the proprietorship business then one can reduce all the details with regard to the identity of the owner, the nature of business to be carried out, financial, property & other Capital the sole owner contributed, the details of bank accounts to be maintained for the business, the full details of loans or any financial advances taken for the establishment of the business, property mortgaged for this purpose & mode of repayment, nature of accounting, details of the books to be maintained for the accounts, the person/s who will be beneficiary in event of death of the sole owner etc.