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A proprietorship, also referred to as a sole proprietorship, is a business that
is run by only one person. As a single proprietorship is run by one person, there are no issues
with management of such a business.
You can convert your proprietorship to a private limited company if your firm grows and your liabilities do as well. An individual must have or engage into a formal agreement for the conversion process in order to proceed, which is a difficult and drawn-out process, so you can seek the assistance of a legal advisor from LegalRaasta.
The owner must follow all slump selling requirements.
The applicant must then apply for a Director Identification Number (DIN) and a Digital Signature Certificate (DSC).
The company name is checked and verified in this step to ensure that it complies with the Ministry of Corporate Affairs' (MCA) requirement.
Next, the proprietor must draft the Memorandum of Association and the Articles of Association.
The applicant would file the application form to obtain the certificate of incorporation once the name of the company had been approved by the appropriate authorities.
After completing the aforementioned steps, the applicant must submit all necessary paperwork to the MCA.
The MCA and Registrar of Companies will issue the company's certificate of incorporation after confirming the procedure.
The next step is to update a bank account in the company's name to manage day-to-day operations on the organization's behalf.
The applicant must now apply with the necessary authority for a PAN and TAN number.
The status of being legally responsible only for a limited amount of a company's debts. As a result, where a company is limited by shares, the members' liability on a winding-up is limited to the amount unpaid on their shares. This means that if you have no balance payable on the number of shares you own, you are not liable to the company for any debt or credit amount that remains unpaid.
In India, the only type of business that can raise funds from Venture Capitalists or Angel Investors is a Private Limited Company.
This refers to the idea that even after a proprietorship business dies, the entity will continue to exist; however, it is not applicable to private limited companies. Even if a particular employee left, the business would continue to run.
Compared to a sole proprietorship business, a private limited company would unquestionably have a better reputation. Due to its registration with the MCA, this registration will increase the company's reputation in the public's eyes.
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