Sole Proprietorship to Company

If one’s business increases then the liability also increases. To manage it, one can plan to switch to the Company-type business model. To carry out this, a formal document “Slump Sale Agreement” is signed between sole proprietor and company this leads to reduced liability and less responsibility.

Sole proprietor vs Privately held
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There are overall 9 main steps in the entire process of conversion and they are:

  • To carry out Slump Sale formalities

  • Get DIN and DSC number 

  • Check the applicability of the name

  • Preparation of MOA and AOA

  • E-company registration 

  • Document submission

  • Getting Certificate of Incorporation (COI)

  • Application for PAN and TAN 

  • Bank detail update

Finally after paying up all the taxes and other tax duties, one should apply for GST number cancellation by providing the reason “Change in legal Structure of firm”. The system will ask to enter GST number of new firm. The transfer of all the assets and liabilities will happen and with respect to transfer of the assets from one entity to another one doesn’t need to pay. However, it is also provided that, in case of conversion, existing firm should cease to be a taxable person at all. There should not be any activity in existing firm after transfer of all assets including stock into new entity.

conversion provisions

Provisions

  • According to the Schedule- 2 of CGST/ SGST Act the stocks or other assets when moved from existing firm to new firm is not considered to be deemed supply of goods in the course or furtherance of the business with the condition that the existing firm ceases to be to be a taxable person after such re-structuring.

  • In the CGST Rate Notification-12/2017 the CGST exemption schedule for services has been set out which has provided an entry exemption of service by way of transfer of a going concern, as a whole or an independent part thereof. 

  • CGST Exemption Schedule for services as set out in CGST Rate Notification-12/2017 has provided an entry for exemption of Services 

  • By combined reading of both the provisions, it is inferred that transfer of a going concern as a whole or an independent thereof shall not be taxable under GST.

  • In the course if there is any unutilized input tax credits which is lying under GST which is there at the time of conversion then, these credits are allowed to get transferred into new entity.

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Ready to convert Sole Proprietorship to the Company?

 

 One-click away to find the perfect HA expert to help you grow

Lets talk

lets talk

Ready to convert Sole Proprietorship to the Company?

 

 One-click away to find the perfect HA expert to help you grow

Lets talk