In today’s scenario, there are many who derive business opportunities not only through e-platforms or mobile applications, but also through the conversion of traditional forms of businesses through partnership/sole proprietary firm into more organized forms like the Company/LLP. This Conversion not only helps in having better branding, goodwill of the company; but also helps the liquidity of funds as well as working capital requirement; as Banks/ Financial Institution give more margin money and CC limit to the corporate as compared to firms and the company can have raised money through Venture Capital/Seed funding. Such conversions are a part of business strategy and used to further the objectives of business. But in order to catch hold of opportunities in the business market, it is mandatory that the entrepreneur is all equipped with business knowledge and market conditions. Without studying the market and business status, the entrepreneur will incur some percent of loss, without benefiting much from the company sales. In such cases, financial consultants like IBS India, walk into the picture where they help the business and the company to gain a profit. Being a corporate consultant company in India, IBS India helps companies to draw a plan for business positioning in the market with its business structuring and incorporation of the company service. Along with this, IBS India also offers legal advisory services in India, that help the companies to establish a successful business in the market. If business success is the ultimate goal any business person want to achieve, then it is necessary that it joins hand with consultancy service provider in India, such as IBS India.
Pros of the conversion:
- Transfer of all the assets and liabilities of the business without paying the stamp duty and capital gain
- Liability will be limited to the extent of their contribution in the company. Therefore, the management forego with the unlimited liability
- Separate Legal entity of the company from its shareholders and directors
- Perpetual session – didn’t dissolve by the death, insolvency or resignation of the shareholders
- Easy to sell, transfer, merger etc with the other body corporates
- Easy transfer of interest is possible as the investment is in the form of shares, whereas in case of partnership reconstitution is required whenever any partner retires or a new partner joins
- Easy expansion and diversification of business
- Convenience in getting loan or finance from the banks and financial institutions
- Change in shareholding and management possible without disrupting the business
As every coin has two sides; in the same way, there are also the cons of conversion:
Cons of the conversion:
- Proper book keeping
- Mandatory audit requirement irrespective of turnover
- Dividend Distribution tax on declaration of dividend and income tax in the hands of the recipient if the amount increases Rs. 10 Lacs.
- Restricted Related party transaction, inter-corporate loans and investments, loans to directors etc
- Increased Disclosures and Compliance requirements
- Has to pay 2% of the net profit in Corporate Social Responsibility; if the net profit of the company is more than Rs. 5 crores.
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