Sole Proprietorship to Private Limited Company
As the proprietorship has almost no definition, besides that given to it by one of the many licenses you can take to get one (SSI, VAT or Service Tax registration, for example), transferring the business to a private limited company is easy. All you need to do is go ahead and start a private limited company and submit an agreement between the sole proprietor and the private limited company, declaring that all the assets are to be transferred to the latter.
Advantages of Private Limited Company
Limits Members’ Liability
Businesses often need to borrow money. In structures such as General Partnership, partners are personally liable for all the debt raised. So if it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In a private limited company, only the amount invested in starting the business would be lost; the directors’ personal property would be safe.
Investment-ready
Private limited companies easily accommodate equity funding as there is a clear distinction between shareholders and directors as well as limited liability. In fact, venture capitalists and private equity funds are unlikely to invest in any other structure. This is because LLPs would require them to become partners in the business, while an OPC can have only one shareholder.
Better Debt-taking Capacity
A private limited company has more options for taking on debt than LLPs. Not only are bank loans easy to obtain (relative to OPCs and LLPs), the option of issuing debentures and convertible debentures are always available to it.
