A registered partnership firm can convert into a private limited company by registering under Part I of Chapter XXI of the Companies Act, 2013. All partners must consent and become shareholders, the firm's assets and liabilities vest in the company, and the conversion can be tax-neutral under Section 47(xiii) if conditions are met.
Eligibility
- Registered partnership firm
- Consent of all partners
- No objection from creditors
Process
- Partners' resolution and consent.
- Newspaper advertisement and creditor notices.
- Name reservation.
- File conversion forms with MoA, AoA and statements of partners and assets.
- Certificate of incorporation.
Tax conditions
All assets and liabilities must pass to the company, partners must receive shares in proportion to their capital, and partners must together hold at least 50% of voting power for five years.
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Update PAN, GST, bank accounts, licences and contracts, and dissolve the firm with the Registrar of Firms.
Frequently asked questions
Can an unregistered firm convert?
The firm should first be registered with the Registrar of Firms before applying for conversion under the Companies Act.
How long does conversion take?
Typically a few weeks to a few months, depending on advertisement periods and ROC review.
Is it better to convert into an LLP instead?
LLP conversion is simpler and keeps lighter compliance. Choose a company if equity funding or ESOPs are planned.
Do employees need new contracts?
Employment continues with the company on conversion, but updating appointment letters is good practice.
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