Corporatization is the need of the hour. The entire world is gradually drifting towards one global market without any trade barriers between the countries. With the emergence of corporate work culture and promotional startup benefits, a great chunk of entrepreneurs are looking forward to corporatization.
Ministry of Corporate Affairs allowed conversion of Partnership Firm into Company under Companies Act, 2013, for such conversion there is need to prepare a list of documents and required to file the same with ROC in forms like URC-1, INC-32, INC-33 and INC-34 etc. While conversion there is need to consider the implications of income Tax provisions also like Capital Gain.
All the assets and liabilities of the firm immediately before the conversion
become the assets and liabilities of the company.
All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid
No Capital Gains tax shall be charged on transfer of property from Proprietorship firm to Company
The goodwill of the Proprietorship firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.
The accumulated loss and unabsorbed depreciation of Proprietorship firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was affected. Thus, such loss can be carried for further eight years in the hands of the successor company.