Convert Proprietorship to Partnership

It is not mandatory but highly recommended. If it is not registered, the firm cannot file a suit against any partner or third party. The partners also cannot sue the partnership firm for his/her claim. However, third parties can sue the firm to enforce their dues or claims. Due to non-registration, the rights of parties are not affected. Also, the partnership can be registered at any time after the formation to remove said effects.

In a proprietorship firm, there is no legal distinction between you and the business; leaving you personally liable for any debts or obligations the business may incur. Also, there are no limitations and no protection for your personal assets. In case of partnership firm, it is divided amongst the partners.

The application for Partnership Firm Registration in India is submitted with the Registrar of Firms (RoF) under whose jurisdiction the Place of Business of Partnership Firm falls. The application of Registration is made in required form along with submitting the Partnership Deed. At the end of the registration procedure, the Certificate of Registration is issued by respective RoF. The process and time of registration may differ for each RoF.

To be eligible to be a partner, an individual must be a major (above the age of 18), should be sane and should not be disqualified by law from entering into a contract.

A partner can nominate a successor to take his/her place in the event of death or retirement of the partner. The mode of introducing a new partner or successor is based on provisions in the partnership deed. A new partnership deed is required once the new partner is admitted into the firm.

As per Schedule-2 of CGST/SGST Act, there is no need to pay tax on the sale of stock where it is moved from proprietorship to the new firm (in case of re-structuring of business) subject to the condition that the existing proprietorship ceases to be a taxable person after such re-structuring.

In case of conversion, existing firm should cease to be a taxable person . There should not be any activity in converted proprietorship after transfer of stock into a new entity. In case, there are unutilized input tax credits lying at the time of such conversion, these credits are allowed to transfer into a new entity.

For confirming the validity of a partnership deed, the partners must pay stamp duty required as per the capital of the firm. The amount of stamp duty payable depends on the amount of capital contribution by partners. The rate of duty is prescribed under the State Stamp Act that differs for every State. Amount of ₹ 500 is included in our package.

The partnership firm shall also have to apply for registration under other statutes such as GST, Shop and Establishments Act and the likes; depending on the nature of the business. In case the sole proprietorship firm owns a trademark, the change regarding the inclusion of partner needs to be added in the trademark registry.

Partnership firms do not need to prepare audited statements for each year. However, depending on the turnover and a few other criteria, a tax audit statement might be necessary.

Yes, you will have to apply for a new GST registration and then surrender the one taken in the name of proprietorship firm. You can get the GST registration done with Legalwiz.in at an additional cost.