Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Incorporate, then take over the business
Since a proprietorship has no separate legal identity, ‘conversion’ means incorporating a fresh Private Limited company and transferring the proprietorship’s business, assets and goodwill into it against shares — you become the shareholder-director. The new company gets its own PAN, GST and bank account. (The mechanics mirror our detailed proprietorship-to-company answer.)
Keeping it tax-neutral
The transfer of business assets can be made tax-neutral if conditions are met — broadly all assets/liabilities pass to the company, you hold at least 50% of shares for a period, and you take only shares as consideration. Get these wrong and the transfer triggers capital gains. Confirm the conditions before converting.
Why founders do it — an example
Example: a proprietor whose business is growing — and who now wants limited liability, the ability to raise equity, run an ESOP, and look credible to clients — incorporates a Pvt Ltd and moves the business in. From then on it’s investor-ready. Migrating contracts, licences and GST is part of the work. Our team can structure the conversion.