his is one of the wisest decisions if you have already surpassed the initial phases of building your business and now looking for growth. This would obviously provide you access to better funding opportunities in the market, a separate legal entity, protection for your personal assets, better control over liabilities, lucrative structure for investors and entry of talented pool in the company.

There is a requirement to execute an agreement between the Proprietorship and the newly formed Private Limited company for the sale of the business. It is pertinent to have one of the objectives in MOA as “the takeover of a Sole Proprietorship Concern”.

Changes

• All the assets and the liability of the Sole Proprietorship entity before the succession become the assets and the liability of the company
• Sole proprietor becomes one of the directors of private company having not less than 50% of the total voting power
• The only benefit or consideration sole proprietor gets is allotment of shares in the company
• Sole Proprietor’s shareholding continues to remain same for a time period of 5 years from the date of the succession
• Minimum share capital of private company will become Rs. 1,00,000/-.
• Minimum number of directors will become 2 in case of private company.
• Both the directors of private company will be allotted DIN.