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Step-by-step Process: Converting a Partnership Firm to a Private Limited Company (India)

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Converting a partnership firm into a private limited company gives the business limited liability, easier capital raising, and better governance — but the conversion must follow a statutory route under the Companies Act, 2013. This guide walks you through the practical, compliance-first steps (forms, filings, documents, tax implications and post-conversion actions) so you — or your client — can make the transition cleanly and confidently.

Quick summary: the statutory route is based on Section 366 of the Companies Act and is implemented through Form URC-1 (for registering an existing entity as a company) and the usual company incorporation forms (SPICe+ and linked forms). Plan for partner approvals, creditor consents (if any), newspaper publication, URC-1 approval, and final incorporation via SPICe+. IndiaFilings+1

Who should consider conversion and why

  • Partnerships that want limited liability, separate legal identity, easier equity funding, and perpetual succession.
  • Firms looking to professionalize governance, issue ESOPs, or scale beyond partner capital limits.
  • Note: conversion is a regulatory and tax event — plan documentation, partner approvals and tax positions before you start. TaxGuru+1

Step-by-step workflow

1. Pre-conversion planning & partner approval

  • Hold a partners’ meeting and record a resolution approving conversion to a private limited company. Agree on: proposed company name(s), shareholding pattern (who becomes shareholder and with what %), proposed directors, authorised capital, and capital contribution.
  • Obtain No Objection Certificates (NOCs) from secured creditors where required (if assets are charged). Identify regulatory approvals that the business needs post-conversion (e.g., RBI/sectoral licenses). IndiaFilings+1

2. Name reservation (RUN / SPICe+ Part A)

  • Apply for name availability using RUN or SPICe+ (Part A) to reserve the proposed company name (ensure it ends with “Private Limited” and complies with naming rules). Once the SRN for name approval is obtained, you use it while filing URC-1 and SPICe+. cleartax

3. Prepare required documents & disclosures

Typical documents to prepare in scanned/PDF form:

  • Partnership deed and certificate of registration (if registered) or evidence of business existence.
  • Statement of assets and liabilities (balance sheet / certified statement) as on date, usually certified by a practising CA.
  • Latest financial statements / profit & loss / balance sheet.
  • Consent letters from proposed directors (DIR-2), identity/address proofs, and DIN/DSC where applicable.
  • NOC from secured creditors (if any) and list of secured creditors with details.
  • Board/partners resolution approving conversion and authorizing filings. IndiaFilings+1

4. Publish statutory notice (URC-2 / newspaper publication as required)

  • The conversion process requires a public notice — publish the prescribed form (URC-2 or as directed) in one English and one vernacular newspaper to invite objections within the statutory window (typically 21 days). Attach proof of the advertisement to URC-1. (Different instruction-kits and recent revisions may vary — follow the URC-1 instructions and MCA guidance.) TaxGuru+1

5. File Form URC-1 (eForm for registration under Section 366)

  • Fill and submit Form URC-1 on the MCA portal with: name SRN, details of the existing partnership (registration number, date of formation), audited/verified statement of assets & liabilities, list of partners and proposed members, declaration on secured creditors and pending litigation (if any), and the newspaper advertisement proof. The form must be digitally signed by an authorised signatory (director/manager/CS) with DIN/PAN as applicable. URC-1 initiates the statutory registration process under Section 366. IndiaFilings+1

6. Wait for URC-1 acceptance / resolve objections (if any)

  • The ROC may scrutinize URC-1 and the public objections (if any). If the URC-1 is accepted, you get the green light to proceed to company incorporation filings. Address any queries raised by ROC promptly.

7. File incorporation forms (SPICe+ Part B and linked forms)

  • After URC-1 approval (or where applicable in linked filing workflows), complete SPICe+ (Part B) and linked forms (SPICe+ MoA/AoA, AGILE-PRO, eForms INC-9, DIR-2 etc.) for incorporation of the new private limited company. Attach the URC-1 acceptance / acknowledgement and the required partner/partner-to-shareholder conversion documents. Pay incorporation fees and submit with digital signatures. cleartax+1

8. Certificate of Incorporation (COI) & migration of business

  • Once SPICe+ is processed, MCA issues the Certificate of Incorporation. The new company now exists as a legal entity. Transfer of business from partnership to the company can happen by:
    • Slump sale or business transfer (if selling the undertaking for lump-sum consideration), or
    • Transfer of individual assets & liabilities (assignments with appropriate transfer documents), or
    • Deemed transfer mechanisms when conversion is recognized under Section 47/Section 45 exemptions (subject to conditions). Choose the route based on tax and stamp duty consequences. Nishith Desai Associates+1

Tax, stamp duty & accounting considerations (critical)

  • Income-tax: Transfers during conversion can attract capital gains unless covered by statutory exemptions. Under certain conditions, transfer from firm to company may be treated as not a transfer (or receive specified exemptions) — but strict conditions apply (shareholding pattern, transfer of entire assets & liabilities, etc.). Get tax opinion and plan for Section 47/Section 45 related implications. cleartax+1
  • Carry-forward of losses: If statutory conditions are met, accumulated losses and unabsorbed depreciation of the firm may be allowed to be carried forward in the company — verify conditions under Income-tax rules. TaxGuru
  • Stamp duty: Conveyance/transfer of immovable property or assets may attract stamp duty — check state laws for valuations and exemptions.
  • GST / other registrations: Existing GST registrations may need to be migrated or re-applied under the new company PAN. Update TAN, bank accounts, vendor contracts and TDS obligations.

Post-conversion compliance & housekeeping

  • Transfer contracts & licences: Assign or novate contracts, supplier agreements, leases and licences to the company (obtain counterparty consent where required).
  • Bank accounts: Open company bank accounts; close/transfer partnership bank accounts with proper sign-offs.
  • Update registrations: PAN (company will have a new PAN via SPICe+), TAN, GST, PF/ESI, import/export licences, IEC, and other industry licences.
  • Employee matters: Issue appointment letters, revised employment agreements and transfer gratuity/ESI records as applicable.
  • Statutory registers & filings: Maintain statutory registers (members, directors, charges) and file necessary ROC forms for charge registration, allotments, and changes.
  • Accounting & audit: Record the business transfer/allotment in books; get the accounting & tax treatment validated by your CA. TaxGuru

Practical checklist (copy-paste into your compliance tracker)

  1. Partners’ resolution authorising conversion & agreed shareholding map.
  2. Name reservation SRN (RUN / SPICe+ Part A).
  3. Statement of assets & liabilities (CA certified).
  4. Partnership deed & registration certificate (if any).
  5. Newspaper ad proof (English + vernacular) and URC-2 details (where required).
  6. File eForm URC-1 with attachments.
  7. URC-1 acceptance / resolve ROC queries.
  8. Prepare MoA/AoA, DIR-2 consents, INC-9 declarations, and DSC/DIN as needed.
  9. File SPICe+ Part B & linked forms; pay fees.
  10. Obtain Certificate of Incorporation.
  11. Decide & execute asset transfer route (slump sale / assignment / slump sale agreement / transfer deed) with tax & stamp planning.
  12. Update bank, GST, TAN, PF/ESI, contracts & licences.
  13. File post-conversion ROC/Tax forms and update statutory registers.

Common mistakes to avoid

  • Starting asset transfers before URC-1 / SPICe+ approvals — coordinate timing to avoid tax or legal gaps.
  • Missing secured creditor NOCs or failing to disclose charges — this causes delays and legal risk.
  • Not taking a professional tax opinion on capital gains and carry-forward of losses — small drafting differences can change tax outcomes.
  • Forgetting to migrate registrations (GST, TAN, PF/ESI) — this disrupts operations.
  • Poor documentation of transfer consideration and valuation — creates disputes and stamp duty exposure.

Timeline — realistic estimate

  • Preparation (partner approvals, CA statements, name reservation): 1–2 weeks (depends on partner availability).
  • Newspaper publication & waiting period: 3 weeks (objection window).
  • URC-1 filing & ROC scrutiny: 1–4 weeks (may vary by ROC).
  • SPICe+ incorporation processing: 1–3 weeks (subject to ROC workload and correctness of filings).
  • Asset transfer & migration work: 1–6 weeks (depending on complexity and third-party consents).

(These are estimates — expect variations by ROC, document readiness and tax planning needs.) TaxGuru+1

Conclusion

Converting a partnership firm to a private limited company is a valuable growth step — it improves access to capital, professional governance, and limited liability — but it is a multi-disciplinary exercise involving company law filings (URC-1 + SPICe+), tax planning, creditor/third-party consents, and operational migration. Use a clear checklist, get CA/Counsel sign-offs on tax and stamp duty, and sequence the filings and transfers to avoid surprises.

Saving Mantra can help you with end-to-end conversion services: partner resolutions & EGM packs, URC-1 and SPICe+ filings, tax opinions, slump sale or asset-transfer documentation, and migration of statutory registrations — all delivered as templates and automated workflows in your compliance dashboard.

The information provided in this blog is for general informational and educational purposes only and should not be construed as legal, tax, or professional advice. While every effort has been made to ensure accuracy and compliance with the applicable provisions of the Companies Act, 2013 and related rules, laws and regulations may change over time, and interpretations may vary based on specific facts and circumstances.

All services are subject to applicable laws, rules, and government approvals prevailing at the time of execution.

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