Conversion of partnership firm into private limited company
neha
(Querist) 30 September 2013
This query is : Resolved
Sir, we are operating a partnership firm with 3 partners since 8 months and as such there is no land , machinery or asset in the name of said firm ,but using the personal land of one partner for production purposes. Now we want to convert it into a private limited company. The problem that arises whether we should go for part ix procedure as there is requirement of minimum 7 partners to convert a firm into a pvt company or simply we incorporate a new private limited company with main object clause in MOA to take over said partnership firm later on.
kindly advice me if there is any disadvantage of not following part ix procedure regarding income tax purpose and capital gain tax.
kindly send me procedure which is safe and advantageous in long term.
Thanks.
Ms.Nirmala P.Rao
(Expert) 06 October 2013
Dear Client,
If you want to convert in to a private Limited company, under the new company law 2013, even a single person can form a Private Limited company. If you make any profits now or in future your company would be liable to income tax.
Kuummaar AS
(Expert) 06 October 2013
Since your partnership is not even one year old, it is suggested that you may form a new company - a Private Limited Company with two or more members or a Limited Company with seven or more members.
neha
(Querist) 08 October 2013
Thanks experts for your advice.
Ms.Nirmala P.Rao
(Expert) 09 October 2013
Dear Neha,
I reiterate that the concept of one person company has been introduced in the recently passed new companies Act 2013. The tax incidence would be as if you'd conducted the company's business as an individual.
Kuummaar AS
(Expert) 09 October 2013
Yes, one person company is possible now. As per Section 2(62) of Companies Act, 2013, “One Person Company” means a company which has only one person as a member
As you are three partners, you can consider forming a private Company. As per Section 2(68)of the said Act, “private company” means a company having a minimum paid-up sharecapital of one lakh rupees or such higher paid-up share capital as may be prescribed,and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a
company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company,
were members of the company while in that employment and have continued to be members after the employment ceased,shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of
the company;
