A sole proprietorship firm is a popular business structure for most small and medium traders/manufacturers/ service providers. However, there is no requirement of registration of any such firm under the extant laws in force. Furthermore, there is no provision for compulsory audit of a sole proprietorship firm. Therefore, as it grows in size, it becomes the need of the hour for a business to evolve into a more trustworthy and transparent structure, such as OPC. It has been observed that such structures are preferred by critical stakeholders (investors, creditors, etc.). Hence, various sole proprietorship firms seek to convert to a corporate structure. ONE PERSON COMPANY is a preferable model for various sole proprietorship firms since it can be incorporated with merely one person as a shareholder. Certain relevant queries in connection with the same have been dealt below.
1. What are some key benefits/ reasons of the conversion of Proprietorship Firm into a One Person Company?
- Investors prefer corporate structures over proprietorship firms.
- The liability of the members or the directors are limited in case of a one person company whereas in case of proprietorship firm the liabilities are unlimited
- A one person company is more transparent structure of business as compared to proprietorship firm
- The benefit of startup recognition under the startup India scheme of the government of India can be availed by a one person company and not by any proprietorship firm.
- The one person company has a separate legal identity as compared to a proprietorship firm.
- There is a separation of ownership and management in a company, whereas in proprietorship firm, the proprietor considered as owners as well as the manager of the firm.
2. What are some key/ basic documents required for conversion of a Proprietorship Firm into a One Person Company?
- Particulars of proposed member
- Declaration of director verifying the particulars of member
- Copy of Newspaper advertisement in prescribed format
- Relevant certification from a CA/CS/CWA; etc.
- Declaration/particulars as per DIR 8, DIR 2, 16(1), INC 9
- Bank Statement with current transactions
- KYC documents
- Electricity Bill, Rent Agreement, NOC by the owner of Registered office
- NOC unsecured creditors & secured creditors
- For the purpose of conversion of a sole Proprietorship Firm into a one person company the owner of the proprietorship firm shall be the shareholder of the one person company
- Preparation of DSC and DIN of proposed Director
- Preparation and Filing of name application through web form RUN through MCA portal.
- Preparation and filing of E-form URC 1, E-form spice, E-form Spice MOA & E-form Spice AOA
- Appropriate Government fees is payable depending upon the authorized capital of the company.
- Issuance of Certificate of incorporation along with PAN and TAN.
4. What is the time period within which the Conversion of proprietorship Firm in one person Company can be completed?
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The fee mentioned above does not include any govt fees, expenditure towards any newspaper advertisement, certification from any professional, preparation of Statement of accounts and accordingly kindly contact our executive to get an all inclusive fee quote