If you are planning to induct a partner in your proprietorship and convert the same to partnership firm in India, here you will find all the relevant details, procedures, advantages and other details.
It has been seen that usually most of the businesses start with the structure of a Proprietorship firm. However, as the business expands, you can change the structure of your business and add one or more than one partner. When the operations are at a scale when it becomes impossible for one person to look over everything for maintenance and growth at the same time, a partner increases the efficiency of the firm’s operations and also sends out the message that it is backed by more than one hand.
As there is an increase in the no. of partners in the business, the efforts and capital both are both on a rise ensuring the growth in business. Although for conversion from an unorganized business structure to a partnership firm, the business is supposed to pass through a few procedural requirements. After being converted to a partnership, it is possible that all the assets, liabilities and rights accompanied to proprietorship will be passed on to the partnership firm with mutual consent of the respective partners.
The application for conversion to a Partnership firm is given to the Registrar of Firms. You can apply for conversion to Partnership with Seedup.in
Advantages of converting your Proprietorship to a Partnership
- The sharing of responsibilities – When you make partners at your firm, everything starting from your resources and rights to your responsibilities and liabilities are shared. You have to pool in money, knowledge and your hard work to achieve a common objective regarding the business.
- A conversion will rule out your need to start a new business – The unabsorbed depreciation and accumulated loss of a Proprietorship automatically gets adjusted as depreciation of the respective successor partnership firm at the time of conversion. All the assets as well as liabilities, including movable and immovable properties, get shifted to the new partnership automatically. This saves you from the hassles of conversions.
- Increase in net worth of all the partners – As per the rules, no capital gains are charged on account of transfer of property from a proprietorship to a partnership firm. This reduction in tax liabilities in a way helps save more money which in turn adds to the net worth of the concerned partners.
- No requirement of Fixed Capital Investment – In a partnership, there is no predetermined minimum or maximum limit how much capital a partner should invest in the firm. Each partner is allowed to make their own decisions regarding their individual investment and gets to divide the stakes in accordance with that. This gives all the partners flexibility to make decisions in matters of the business.
Required Documents for Converting to a Partnership
- Address proof of the registered office address (electricity/water bill)
- Copies of PAN Card, Aadhar Card, Passport/Voter ID card of all the partners.
- Forms of GST or other registrations for change in status of the business.
- Latest Statements of the assets and liabilities of the company that is certified by a Chartered Accountant.
Procedure for Conversion to a Partnership – with Seedup.in
- Fill the forms – The first step requires to fill out our questionnaire to provide some basic information and then submit the required documents.
- Drafting of the Partnership Deed – Then the experts at Seedup.in draft the Partnership deed which is later reviewed and confirmed by all the partners.
- Notarization of the Partnership Deed – After the payment of stamp duty on the agreement, the next step is the notarization of the partnership deed.
- Application for TAN and PAN – The last step is applying for the firm’s TAN and PAN number.
This whole procedure can take anywhere between 12-15 days at the end of which you will receive your Certificate of Registration from the ROF.