Convert Partnership Firm to Private Limited Company
Get Expert Assistance to Register Your Partnership as a Pvt Ltd Company under Section 366 in 15 to 30 Working Days Starting at Just ₹7,999
Automatic Transfer of Assets, Liabilities, and Contracts. Capital Gains Exemption under Section 47(xiii). Listed amounts are IncorpX professional charges for end-to-end assistance. Government / statutory fees are charged separately at actuals.
Certificate of Incorporation with CIN
Form URC-1 Filing with ROC
MOA (e-MOA) and AOA (e-AOA) Drafting
SPICe+ Filing with PAN, TAN, GSTIN
DSC and DIN for All Directors
Newspaper Publication (URC-2) Coordination
Partner Consent Documentation
30-Day Post-Conversion Compliance Support
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Ready to Convert Your Partnership to Pvt Ltd?
Get expert assistance to register your partnership firm as a Private Limited Company under Section 366 with MCA. Automatic transfer of all assets and liabilities. IncorpX professional fee starting at ₹7,999. Government fees charged separately at actuals.
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Convert Partnership Firm to Pvt Ltd Company
End-to-end professional assistance with partnership to company conversion under Section 366 of the Companies Act, 2013.
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Partnership to Pvt Ltd Conversion Package 2026
From ₹7,999 IncorpX professional fee for assistance
Timeline depends on the application type and authority review
Application support Professional assistance
Certificate of Incorporation with CIN
Form URC-1 Filing with ROC
MOA and AOA Drafting
SPICe+ Filing and Incorporation
DSC for All Proposed Directors
DIN Application (if required)
Newspaper Publication Coordination (URC-2)
Partner Consent Documentation
Creditor NOC Assistance
30-Day Post-Conversion Compliance Support
*Listed amounts are IncorpX professional charges for end-to-end assistance. Government / statutory fees are charged separately at actuals.
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What is Partnership Firm to Private Limited Company Conversion?
Partnership firm to Private Limited Company conversion is the legal process of registering an existing partnership as a company under Section 366 of the Companies Act, 2013, with automatic transfer of all assets, liabilities, contracts, and legal proceedings. This page covers the complete conversion process, two available routes (Section 366 vs fresh incorporation), documents required, cost breakdown with state-wise stamp duty, tax implications under Section 47(xiii), and post-conversion compliance requirements.
Partnership firms face inherent limitations: unlimited personal liability for partners, no perpetual succession, and inability to issue equity shares to investors. Converting to a Private Limited Company solves these constraints. Since August 15, 2018, both registered and unregistered partnership firms with 2 or more members can convert under Section 366, as governed by Rule 3 of the Companies (Authorized to Register) Rules, 2014. The conversion preserves business continuity, eliminates the need for separate asset transfer deeds, and keeps all pending legal proceedings intact. Explore all business conversion services offered by IncorpX.
Governing Law: Companies Act, 2013 (Chapter XXI, Part I, Sections 366-374) | Rules: Companies (Authorized to Register) Rules, 2014 (Rule 3) | Regulator: Registrar of Companies (mca.gov.in) | Primary Forms: URC-1, URC-2, SPICe+ | Tax Exemption: Section 47(xiii), Income Tax Act, 1961
Parameter
Value
Governing Law
Companies Act, 2013 (Section 366)
Regulator
Registrar of Companies (ROC)
Primary Form
Form URC-1 (Rule 3)
Processing Time
15 to 30 Working Days
Government Fee
₹200 to ₹600 (based on authorized capital slab) + stamp duty (varies by state)
Professional Fee (IncorpX)
Starting ₹7,999
Two Routes: Section 366 Conversion vs Fresh Incorporation
Partnership firms can convert to a Private Limited Company through two distinct routes. Each has different timelines, costs, and legal implications. Understanding both helps you choose the right path for your firm.
Route 1: Section 366 Registration (Recommended). The existing partnership registers directly as a company under Chapter XXI, Part I of the Companies Act, 2013. This is the preferred route because it preserves complete business continuity. All assets, liabilities, contracts, employees, and pending court cases transfer automatically to the new company. No separate Business Transfer Agreement is needed. The partnership firm's identity merges into the company without a gap.
Route 2: Fresh Incorporation + Slump Sale. A new Private Limited Company is incorporated under Section 7, and the partnership business is transferred to it through a separate slump sale or Business Transfer Agreement. The partnership firm is then dissolved. This route takes longer (30 to 60 days), requires separate asset transfer documentation, and may trigger additional stamp duty on immovable property transfers.
Parameter
Section 366 Conversion
Fresh Incorporation + Slump Sale
Business Continuity
Automatic, no gap
Requires separate transfer
Timeline
15 to 30 working days
30 to 60 working days
Asset Transfer
Automatic under Section 366
Via BTA/Slump Sale Agreement
Contracts
Continue without novation
Require assignment/novation
Pending Legal Cases
Continue against new company
Require party substitution
Capital Gains Tax
Exempt under Section 47(xiii)
Taxable (unless structured correctly)
Stamp Duty on Assets
Only on MOA/AOA
Additional on immovable property
Complexity
Single filing (URC-1 + SPICe+)
Multiple filings + BTA execution
Recommendation: Section 366 conversion is the better route for most partnership firms. It is faster, preserves all legal relationships, and qualifies for capital gains exemption under Section 47(xiii). IncorpX recommends the fresh incorporation route only when Section 366 filing is not feasible due to specific regulatory constraints or disputed partnership claims.
Benefits of Converting Partnership Firm to Private Limited Company
Converting from a partnership to a Pvt Ltd structure gives your business specific legal, financial, and operational advantages. Here are 8 concrete benefits backed by statute and data.
Limited Liability Protection
Partners' personal assets stay protected after conversion. Liability is limited to the share capital subscribed. Under the Indian Partnership Act, partners have unlimited personal liability for all firm debts.
Business Continuity
A Pvt Ltd company has perpetual succession under the Companies Act, 2013. The company survives partner exit, death, or insolvency. Partnership firms dissolve when any partner leaves.
Equity Fundraising
Issue equity shares to angel investors, VCs, and PE firms after conversion. Partnerships cannot issue equity. A clean cap table structure enables valuations and structured funding rounds.
ESOP Eligibility
Offer Employee Stock Option Plans to attract and retain talent. Only companies registered under the Companies Act can issue ESOPs. This is a critical tool for startup-stage hiring.
Easy Ownership Transfer
Transfer shares without dissolving the company. Partnership firms require deed amendment and consent from all partners for any ownership change.
Capital Gains Exemption
Section 47(xiii) of the Income Tax Act provides capital gains tax exemption on conversion when all 4 conditions are met. Partners' capital accounts convert to equity without tax liability.
Automatic Asset Transfer
Section 366 ensures all assets, liabilities, contracts, and legal proceedings transfer automatically. No separate transfer deeds or Business Transfer Agreements are required.
Enhanced Credibility
The Pvt Ltd structure improves credibility with banks, clients, and government agencies. Easier to obtain loans above ₹10 lakh, government contracts, and vendor empanelment.
Eligibility and Prerequisites for Partnership to Pvt Ltd Conversion
Not every partnership firm can file for conversion immediately. The following requirements must be met before filing Form URC-1 with the Registrar of Companies.
Requirement
Detail
Minimum Partners
2 (become shareholders and directors of Pvt Ltd)
Partner Consent
Not less than three-fourths of partners present in person
Partnership Deed
Must contain conversion provision (or execute supplementary deed)
Firm Status
Registered or unregistered (2+ members, eligible since August 2018)
Creditor NOC
Written consent from all secured creditors
Filings Up-to-Date
All partnership ITRs and filings must be current
Professional Certification
Statement of assets and liabilities certified by a qualified professional (within 30 days of URC-1 filing)
Newspaper Publication
Advertisement in 2 newspapers (URC-2 format), 21 clear days before URC-1 filing
Warning: If your partnership deed does not contain a clause permitting conversion to a company, you must execute a supplementary deed signed by all partners before filing URC-1. This is a common oversight that delays the process by 5 to 7 days.
Before August 2018: Only partnership firms registered under the Indian Partnership Act, 1932, could convert under Section 366. After the 2018 amendment, unregistered firms with 2 or more members became eligible. However, unregistered firms must provide a valid partnership deed and proof of business existence (bank statements, ITR filings, GST registration).
Step-by-Step Process to Convert Partnership Firm to Pvt Ltd
Converting a partnership firm to a Private Limited Company under Section 366 involves 10 steps, takes 15 to 30 working days, and costs ₹7,999 onwards (plus government fees and stamp duty at actuals). Here is the complete process.
Step 1: Obtain Digital Signature Certificates (DSC)
Apply for Class 3 Digital Signature Certificates for all proposed directors (former partners). DSCs are mandatory for signing all MCA e-forms. Each DSC costs ₹1,500 to ₹2,000 and is valid for 2 years.
Portal: Certifying Authority (eMudhra/Sify) | Timeline: 1 to 2 working days
Step 2: Apply for Director Identification Number (DIN)
For partners who do not already have a DIN, it is allotted through the SPICe+ form at no additional cost. Identity proof, address proof, and a passport-size photograph are required. Existing DINs must complete DIR-3 KYC (annual filing, no fee if filed before September 30).
Portal: MCA (mca.gov.in) | Form: SPICe+ (integrated DIN allotment) / DIR-3 KYC | Timeline: 1 to 2 working days
Step 3: Obtain Partner Consent and Prepare Supplementary Deed
Secure written consent from at least three-fourths of partners (present in person or by proxy). If the partnership deed does not include a conversion clause, execute a supplementary deed authorizing the firm's registration as a company under Section 366.
Document: Consent Letter + Supplementary Deed (if required) | Timeline: 2 to 3 working days
Step 4: Draft MOA and AOA for the Proposed Company
Draft the Memorandum of Association (e-MOA) and Articles of Association (e-AOA) for the new Private Limited Company. The MOA defines the company's objects, registered office state, and authorized share capital. The AOA sets internal governance rules, share transfer restrictions, and director appointment procedures.
Documents: e-MOA (INC-33) + e-AOA (INC-34) | Timeline: 2 to 3 working days
Step 5: Get Certified Statement of Assets and Liabilities
Obtain a statement of assets and liabilities of the partnership firm, certified by a practicing Tax Professional. This statement must not be older than 30 days from the date of URC-1 filing. It forms part of the Third Schedule requirement under the Companies Act.
Document: Certified Statement (Third Schedule) | Validity: 30 days from filing | Timeline: 3 to 5 working days
Step 6: Obtain Creditor NOCs
Get written No Objection Certificates from all secured creditors of the partnership firm. Each NOC must confirm that the creditor consents to the firm's registration as a company and the assumption of liabilities by the new entity. Unsecured creditors must be notified through the newspaper advertisement.
Document: Creditor NOC Letters | Timeline: 3 to 7 working days (depends on creditor response)
Step 7: Publish Newspaper Advertisement (URC-2)
Publish an advertisement in Form URC-2 in two newspapers: one in English and one in the regional language of the district where the registered office is located. The advertisement must run at least 21 clear days before filing Form URC-1 with the ROC. This gives creditors and the public time to raise objections.
Form: URC-2 | Medium: 2 Newspapers (English + Regional) | Timeline: 21 clear days waiting period
Step 8: Reserve Company Name via RUN/SPICe+
Reserve the proposed company name through RUN (Reserve Unique Name) service or as part of the SPICe+ form. The name must include "Private Limited" and cannot be identical or too similar to an existing company or trademark. Two name choices can be submitted per application.
Portal: MCA (mca.gov.in) | Form: RUN or SPICe+ Part A | Fee: ₹1,000 (RUN) | Timeline: 1 to 2 working days
Step 9: File Form URC-1 with ROC
File Form URC-1 (Application for Registration of Existing Company) with the Registrar of Companies. Attach the partnership deed, partner consent, certified statement of assets and liabilities, creditor NOCs, URC-2 newspaper clippings, list of members (Third Schedule), MOA, AOA, and proof of registered office. Pay the applicable government fee based on authorized capital.
Portal: MCA (mca.gov.in) | Form: URC-1 (Rule 3) | Fee: ₹200 to ₹600 (based on authorized capital slab) | Timeline: 5 to 10 working days for ROC processing
Step 10: Receive Certificate of Incorporation (CIN)
After verification, the ROC issues the Certificate of Incorporation with a Corporate Identity Number (CIN). PAN and TAN are allotted automatically through the SPICe+ process. The partnership firm ceases to exist as a separate entity from the date of incorporation. All assets, liabilities, contracts, and legal proceedings transfer to the new company by operation of law under Section 366.
Output: Certificate of Incorporation + CIN + PAN + TAN | Timeline: 1 to 3 working days after ROC approval
Common Mistake: The certified statement of assets and liabilities must not be older than 30 days at the time of URC-1 filing. If your URC-1 preparation takes longer, you will need a fresh professional certificate. Plan the professional certification and URC-1 filing timeline together to avoid this delay.
Our team assists with URC-1 filing, MOA/AOA drafting, and all ROC coordination.
Documents Required for Partnership to Company Conversion
Two sets of documents are required: one for the URC-1 filing (Section 366 registration) and one for the SPICe+ incorporation process. Keep all documents in digital format (scanned PDF, max 2 MB per file) for MCA portal upload.
For URC-1 Filing (Section 366 Registration)
Partnership DeedOriginal executed deed with all amendments
Supplementary Deed (if needed)Authorizing conversion to a company
Partner Consent LettersWritten consent from 3/4th of partners
Certified StatementAssets and liabilities, within 30 days of filing
List of Members (Third Schedule)Names, addresses, shares of all partners
Creditor NOCsWritten consent from all secured creditors
Newspaper Clippings (URC-2)2 newspapers, English + Regional, 21 days prior
Partnership Firm PAN CardCopy of PAN allotted to the firm
Latest ITR of Partnership FirmLast 3 years filed returns with computation
Firm Registration CertificateIf registered under Partnership Act, 1932
For SPICe+ Filing (Director/Shareholder KYC)
PAN Card of Each PartnerSelf-attested copy, mandatory for Indian nationals
Aadhaar Card of Each PartnerFor OTP verification during SPICe+ filing
Address Proof of Each PartnerBank statement, utility bill, not older than 2 months
Passport-Size PhotographsWhite background, recent, for each proposed director
Registered Office ProofRent agreement + NOC from landlord + utility bill
Digital Signature CertificatesClass 3 DSC for all proposed directors
Pro Tip: Start collecting creditor NOCs and scheduling the professional certification early. The newspaper advertisement (URC-2) requires a 21-day waiting period, and the certified statement expires in 30 days. Coordinate both timelines so the certified statement stays valid when URC-1 is filed.
Partnership to Private Limited Company Conversion Cost 2026
The total cost of converting a partnership firm to a Pvt Ltd company depends on the authorized share capital, state of incorporation (stamp duty varies), and number of directors. Here is a detailed breakdown.
Component
Amount (₹)
Notes
Professional Fee (IncorpX)
₹7,999 onwards
Includes URC-1 + SPICe+ filing, MOA/AOA drafting
Government Fee (URC-1)
₹200 to ₹600
Based on authorized capital slab (Companies (Registration Offices and Fees) Rules, 2014)
DSC (per director)
₹1,500 to ₹2,000
Class 3 DSC, valid for 2 years
DIN Application
No additional cost
Allotted via SPICe+ at no extra fee for new directors
Name Reservation (RUN)
₹1,000
Per application, 2 name choices allowed
Stamp Duty (MOA/AOA)
₹1,300 to ₹15,000+
Varies by state (see table below)
Newspaper Advertisement (URC-2)
₹2,000 to ₹5,000
2 newspapers, depends on publication and city
Professional Certification Fee
₹2,000 to ₹5,000
For statement of assets and liabilities
Notarization Charges
₹500 to ₹1,000
For affidavits and declarations
Estimated Total Cost: ₹20,000 to ₹50,000 (including all government fees, stamp duty, professional fees, and newspaper charges). The final amount depends on the state of registration and authorized share capital.
Listed amounts are IncorpX professional charges for end-to-end assistance. Government / statutory fees are charged separately at actuals.
State-Wise Stamp Duty on MOA and AOA
Stamp duty is a state subject and varies significantly. For more details, read our state-wise stamp duty guide.
State
Stamp Duty on MOA
Stamp Duty on AOA
Total
Delhi
₹200
₹100
₹300
Maharashtra
₹5,000
₹1,000
₹6,000
Karnataka
₹5,000
₹500
₹5,500
Tamil Nadu
₹300
₹300
₹600
Gujarat
₹300
₹300
₹600
Uttar Pradesh
₹5,000
₹1,000
₹6,000
West Bengal
₹2,000
₹1,000
₹3,000
Rajasthan
₹500
₹500
₹1,000
Telangana
₹5,000
₹500
₹5,500
Kerala
₹5,000
₹200
₹5,200
Cost-Saving Tip: Delhi has the lowest stamp duty at ₹300 total. If your business can use a Delhi registered office address, you save ₹3,000 to ₹5,700 compared to Maharashtra or Karnataka. The registered office can be changed to another state later by filing Form INC-23.
Share your firm details. We calculate the exact cost with state-specific stamp duty included.
Tax Implications of Partnership to Pvt Ltd Conversion
Section 47(xiii) of the Income Tax Act, 1961, exempts capital gains on transfer of assets when a partnership firm converts to a company. This exemption applies only when all 4 conditions listed below are satisfied. Failure to meet any condition makes the entire transfer taxable.
Condition
Requirement
Section Reference
Condition 1: Shareholding
All partners of the firm become shareholders of the company in the same proportion as their capital accounts on the date of conversion
Section 47(xiii)(a)
Condition 2: Holding Period
Partners (now shareholders) do not receive any consideration other than shares allotted by the company
Section 47(xiii)(b)
Condition 3: Asset Holding
The company holds at least 50% of the total voting power and the aggregate shareholding of former partners is not less than 50% for a period of 5 years from the date of conversion
Section 47(xiii)(c)
Condition 4: No Other Benefit
Partners do not receive any direct or indirect benefit or consideration other than shares and the right to participate in the management of the company
Section 47(xiii)(d)
5-Year Lock-In Warning: If any former partner sells shares within 5 years of conversion and the aggregate partner shareholding drops below 50%, the capital gains exemption under Section 47(xiii) gets revoked. The original transfer will be treated as taxable, and tax will be levied on the market value of assets as on the conversion date. Plan any share transfers only after the 5-year period.
Other Tax Considerations
GST: Transfer of business as a going concern is not a supply under Schedule II of the CGST Act, 2017. No GST is payable on the conversion itself. However, a new GST registration must be obtained for the newly formed company, and the old firm's GSTIN must be surrendered.
PAN and TAN: The new company receives a fresh PAN and TAN through the SPICe+ process. The partnership firm's PAN must be surrendered after filing the final ITR for the pre-conversion period.
Income Tax Return: Two ITRs are required for the conversion year. The partnership firm files ITR-5 for the period from April 1 to the date of incorporation. The new company files ITR-6 for the period from incorporation to March 31.
Corporate Tax Rate: The new Pvt Ltd company can opt for the 22% tax rate under Section 115BAA (effective rate 25.17% including surcharge and cess), compared to the flat 30% rate (effective 34.94%) applicable to partnership firms.
Tax Planning Tip: Structure the conversion at the start of a financial year (April) to simplify ITR filing. The partnership firm files a short-period return, and the company gets nearly a full year of operations under the lower corporate tax rate.
After Conversion: Compliance Requirements
Once your partnership converts to a Pvt Ltd company, you must follow the compliance calendar prescribed under the Companies Act, 2013. Missing these deadlines attracts penalties. Consider IncorpX's Pvt Ltd compliance package for ongoing filing support.
Deadline Alert: Section 248 of the Companies Act allows the ROC to strike off companies that do not file annual returns (MGT-7A) and financial statements (AOC-4) for 2 consecutive years. A struck-off company loses its legal status, and directors face a 5-year disqualification under Section 164(2). File all returns on time.
Partnership Firm vs Private Limited Company: Key Differences
This comparison covers the structural, legal, and financial differences between a partnership firm and a Private Limited Company. Use it to evaluate whether conversion is the right move for your business.
Parameter
Partnership Firm
Private Limited Company
Governing Law
Indian Partnership Act, 1932
Companies Act, 2013
Legal Entity
Not a separate legal entity
Separate legal entity with perpetual succession
Liability
Unlimited, joint and several
Limited to share capital subscribed
Minimum Members
2
2 shareholders + 2 directors
Maximum Members
50
200 shareholders
Registration
Optional
Mandatory with ROC
Ownership Transfer
Requires deed amendment + all partner consent
Share transfer (with board approval)
Tax Rate (FY 2025-26)
30% + surcharge + cess (effective 34.94%)
22% under Section 115BAA (effective 25.17%)
Fundraising
Only from partners or banks
Equity shares, preference shares, debentures, VCs, PEs
Decision Framework: Choose Pvt Ltd if you plan to raise equity, issue ESOPs, or onboard investors in the next 2 to 3 years. Choose LLP if you want limited liability with lower compliance and do not need equity fundraising.
Free consultation. We evaluate your partnership deed, identify the best conversion route, and provide exact cost estimates.
Common Mistakes During Partnership to Pvt Ltd Conversion
Based on our experience handling 10,000+ business registrations and conversions, these are the 7 most frequent mistakes partnership firms make during the Section 366 conversion process. Avoiding them saves 2 to 4 weeks and ₹5,000 to ₹15,000 in additional costs.
Mistake 1: Filing URC-1 Before the 21-Day Newspaper Waiting Period
Section 374(b) of the Companies Act mandates a 21 clear days gap between the newspaper publication (URC-2) and URC-1 filing. Filing even 1 day early results in ROC rejection. Clear days exclude the publication date and the filing date. In 2025, 14% of first-time URC-1 filings by unassisted applicants were rejected for this reason alone, according to IncorpX's internal filing data.
Mistake 2: Professional Certificate Older Than 30 Days at Filing
The certified statement of assets and liabilities must be dated within 30 days of URC-1 filing. Firms that obtain the professional certificate before publishing the newspaper advertisement often exceed this 30-day validity by the time the 21-day waiting period ends. Schedule the professional certification to coincide with URC-1 filing, not with newspaper publication.
Mistake 3: Missing Conversion Clause in Partnership Deed
The partnership deed must contain a clause permitting conversion to a company. If this clause is absent, a supplementary deed signed by all partners must be executed before filing. This oversight adds 5 to 7 working days to the timeline. Review your deed before starting the process.
Mistake 4: Not Obtaining Written Creditor NOCs Before Filing
Secured creditors must provide written No Objection Certificates. Verbal consent does not count. Banks and financial institutions take 7 to 15 working days to process NOC requests. Start this step in parallel with the newspaper publication to avoid idle waiting time after the 21-day period ends.
Mistake 5: Incorrect Shareholding Ratio (Losing Section 47(xiii) Exemption)
Partners must receive shares in the same proportion as their capital accounts on the conversion date. Any deviation, even 1%, disqualifies the Section 47(xiii) capital gains exemption. A partner with 40% capital must hold exactly 40% equity. Have a qualified professional verify the ratio before share allotment.
Mistake 6: Not Surrendering the Old PAN After Conversion
The partnership firm's PAN must be surrendered to the Income Tax Department after the final ITR is filed. Using the old PAN for transactions post-conversion creates tax compliance issues. The new company's PAN is allotted automatically via SPICe+. Complete the PAN surrender within 30 days of incorporation.
Mistake 7: Ignoring GST Re-Registration Timelines
The partnership firm's GSTIN becomes invalid after conversion. A new GST registration must be obtained for the new company. File Form ITC-02 to transfer accumulated input tax credit. Missing this step leads to loss of ITC and potential penalties under the CGST Act.
Warning: Selling shares within 5 years that reduce aggregate partner holding below 50% triggers full retrospective taxation on the original conversion. This is not a penalty; it is a complete revocation of the Section 47(xiii) exemption with interest from the conversion date.
Advantages of Partnership to Pvt Ltd Conversion
Limited Liability
Shareholders' personal assets are protected. Liability is capped at the value of shares held, unlike partnership where partners are personally liable for all firm debts.
Capital Gains Exemption
Section 47(xiii) provides tax-free transfer of assets from partnership to company when the 4 statutory conditions are met. This saves significant tax on appreciated assets.
Lower Corporate Tax
Companies under Section 115BAA pay 22% (effective 25.17%), compared to 30% (effective 34.94%) for partnership firms. For a firm with ₹50 lakh profit, this saves ₹4.88 lakh annually in tax.
Equity Fundraising
Issue equity shares to VCs, angel investors, and PE funds. Partnership firms cannot issue equity and rely solely on partner contributions and bank loans.
Perpetual Succession
Company continues regardless of changes in shareholders. Death, retirement, or insolvency of a partner does not affect the company's existence.
Automatic Asset Transfer
Section 366 transfers all assets, liabilities, contracts, and legal proceedings by operation of law. No separate transfer deeds or Business Transfer Agreements required.
ESOP Eligibility
Only companies can issue Employee Stock Option Plans. ESOPs help attract senior talent without immediate cash outflow.
Disadvantages of Partnership to Pvt Ltd Conversion
Higher Compliance
A Pvt Ltd company must file annual returns (MGT-7A), financial statements (AOC-4), hold board meetings, appoint an auditor, and maintain statutory registers. Compliance costs range from ₹15,000 to ₹40,000 per year.
5-Year Share Lock-In
To retain the Section 47(xiii) exemption, former partners cannot sell shares that would reduce aggregate partner shareholding below 50% for 5 years. This limits exit flexibility.
Mandatory Audit
All Pvt Ltd companies require a statutory audit, regardless of turnover. Partnership firms need audit only if turnover exceeds ₹1 crore (₹10 crore for digital transactions). Audit fees add ₹10,000 to ₹25,000 annually.
Less Flexibility in Profit Distribution
Partnership firms distribute profits per the deed without restrictions. In a Pvt Ltd company, dividends are paid from distributable profits only, after transfer to reserves as required, and are taxable in the hands of shareholders.
Explore all conversion options: OPC to Pvt Ltd, Section 8 to Pvt Ltd, and more.
What Our Clients Say
IncorpX has assisted with 850+ partnership to company conversions since 2019. Here are 3 recent outcomes from verified clients.
Rajesh Mehta, Mehta Trading Co.
"Our 15-year-old partnership firm converted to Pvt Ltd in 22 working days. IncorpX assisted with the URC-1 filing, newspaper publication, and creditor NOCs. We retained Section 47(xiii) exemption on ₹1.2 crore in appreciated assets. The team coordinated every step."
Partnership to Pvt Ltd, Mumbai, March 2026
Priya Sharma, Sharma & Associates
"We had 3 secured creditors and an unregistered partnership deed. IncorpX drafted the supplementary deed, coordinated all NOCs in 10 days, and assisted with the full conversion process in 28 working days. Our GST ITC of ₹4.5 lakh transferred to the new company without issues using Form ITC-02."
Partnership to Pvt Ltd, Delhi, January 2026
Vikram Patel, Greenfield Exports
"We needed the conversion to raise ₹50 lakh from an angel investor. IncorpX assisted with the Section 366 filing, and we received our CIN in 18 working days. The investor signed the term sheet within a week of incorporation. IncorpX professional fee was ₹12,500; government fees were charged separately."
Partnership to Pvt Ltd, Ahmedabad, February 2026
4.8/5 Rating on Google from 200+ verified client reviews for IncorpX's partnership to Pvt Ltd conversion assistance across multiple Indian cities.
Service Guarantee and Trust Credentials
IncorpX Service Guarantee
Every partnership to Pvt Ltd conversion engagement is covered by IncorpX's 100% money-back guarantee. If your URC-1 filing is rejected due to an error attributable to IncorpX (incorrect form data, missed attachments, or documentation errors), we re-file at no additional cost. If the re-filing also fails due to our error, you receive a full refund of the professional fee (₹7,999 or the amount paid). Government fees and stamp duty paid to third parties are non-refundable. This guarantee is valid for 90 days from the engagement start date.
Data Methodology and Sources
All cost figures, government fees, stamp duty rates, and timelines published on this page are sourced from official government portals and verified against IncorpX's internal filing records. Specific sources include:
Government fees:MCA Portal fee schedules under the Companies (Registration Offices and Fees) Rules, 2014
Stamp duty: State-specific Stamp Act schedules, verified through Income Tax Portal and state e-stamping portals
Tax rates: Income Tax Act, 1961 (now Income Tax Act, 2025) and Finance Act notifications published in the Gazette of India
Processing timelines: Based on IncorpX's internal data from 850+ partnership conversions filed between 2019 and 2026
Stay informed about recent changes that impact partnership to Pvt Ltd conversion. IncorpX monitors MCA notifications, CBDT circulars, and Finance Act amendments to keep this page current.
The new Income Tax Act, 2025 takes effect from April 1, 2026. The capital gains exemption provisions for firm-to-company conversion (previously Section 47(xiii)) continue under the new Act with renumbered sections. IncorpX has mapped all applicable section numbers. The 4 mandatory conditions remain unchanged.
Update 2: MCA V3 Portal for Company Filings
The MCA V3 portal introduces 38 new company forms, including updated versions of SPICe+ and DIR-3. URC-1 continues to be filed on the MCA portal. All IncorpX filings now use the V3 portal interface with the new form numbers.
Update 3: Corporate Laws Amendment Bill 2026
The Corporate Laws Amendment Bill 2026 proposes changes to the Companies Act, 2013, including updated compliance thresholds for small companies and new CSR requirements. Partnership firms converting to Pvt Ltd after this amendment may benefit from reduced compliance if classified as a "small company" (paid-up capital up to ₹4 crore, turnover up to ₹40 crore).
ISO 9001:2015 certified. Qualified professionals. 100% money-back guarantee on professional fees.
FAQs on Converting Partnership Firm to Private Limited Company
Answers to the most common questions about partnership firm to Private Limited Company conversion under Section 366 of the Companies Act, 2013.
Partnership firm to Private Limited Company conversion is the legal process of registering an existing partnership as a company under Section 366 of the Companies Act, 2013. This process preserves business continuity, automatically transfers all assets, liabilities, and contracts, and partners become shareholders and directors of the new company.
Section 366 falls under Chapter XXI, Part I of the Companies Act, 2013, and authorizes unregistered companies (including partnership firms) to register as companies. The firm applies using Form URC-1 with the Registrar of Companies, following Rule 3 of the Companies (Authorized to Register) Rules, 2014.
Form URC-1 is the application filed with the ROC under Rule 3 of the Companies (Authorized to Register) Rules, 2014, for registering a partnership firm as a company. It requires a certified statement of assets and liabilities (not older than 30 days), partnership deed, creditor NOCs, and partner consent documents.
Form URC-2 is the prescribed format for newspaper advertisement under Section 374(b) of the Companies Act. The partnership firm must publish it in 2 newspapers (one English daily and one vernacular) of the district where the firm's office is located, and wait 21 clear days before filing with the ROC.
Yes. Since August 15, 2018, both registered and unregistered partnership firms with 2 or more members can convert to a Private Limited Company under Section 366. Registered firms must have up-to-date filings with the Registrar of Firms. Unregistered firms need to provide proof of existence and partnership deed.
After conversion, all assets, rights, liabilities, and pending legal proceedings of the partnership firm automatically transfer to the new company. The partnership firm ceases to exist. Partners must file intimation with the Registrar of Firms for dissolution and surrender the partnership firm's PAN to the Income Tax Department.
Yes. The partnership firm can retain its existing name during conversion by adding the "Private Limited" suffix as required under the Companies Act, 2013. Name availability is checked via the RUN (Reserve Unique Name) form on the MCA portal. Name reservation is valid for 20 days and costs ₹1,000.
Not all partners need to consent. The Companies Act requires consent from not less than three-fourths of partners present in person at the meeting. However, securing consent from all partners is recommended to avoid disputes. The consent must be recorded in the minutes of the partners' meeting and attached with the URC-1 filing.
A minimum of 2 partners is required for conversion under Section 366. These partners become the initial shareholders and directors of the Private Limited Company. A Pvt Ltd company requires a minimum of 2 directors and 2 shareholders, which the existing partners fulfill.
All existing contracts of the partnership firm remain valid and enforceable against the new Private Limited Company under Section 366. The company is bound by all agreements, leases, vendor contracts, and customer commitments entered by the partnership. No separate assignment or novation of contracts is required for Section 366 conversion.
Section 47(xiii) of the Income Tax Act provides capital gains tax exemption when a partnership firm converts to a company. The exemption requires 4 mandatory conditions: all firm assets and liabilities transfer to the company, partners become shareholders in the same proportion, partners collectively hold 50% or more voting power for 5 years, and partners receive no benefit other than shares.
Yes. Existing employees should receive fresh appointment letters from the new Private Limited Company. Employment continuity is preserved under Section 366, but documentation must reflect the new company name, CIN, and PAN. Update PF (EPFO), ESI, and professional tax registrations with the new company details within 30 days.
The partnership deed ceases to have legal effect after the Certificate of Incorporation is issued. The firm's operations are thereafter governed by the Memorandum of Association (MOA) and Articles of Association (AOA) of the new Private Limited Company. Retain the partnership deed as a legal record for at least 8 years.
A minor admitted to the benefits of a partnership firm cannot become a director of the Private Limited Company as the minimum age for directorship is 18 years under Section 157 of the Companies Act. However, a minor can hold shares through a legal guardian. The minor's share in partnership profits can be converted to equity shareholding.
The procedure involves 10 steps: hold partner meeting and obtain three-fourths consent, review partnership deed, obtain creditor NOCs, apply for DSC and DIN, reserve company name via RUN, publish newspaper advertisement (URC-2, wait 21 days), draft MOA/AOA, file Form URC-1 with ROC, file SPICe+ for incorporation, and complete post-conversion formalities.
The complete conversion process takes 15 to 30 working days. Key timelines: DSC issuance (1 to 2 days), name reservation (2 to 3 days), newspaper publication and 21-day waiting period (25 days), URC-1 processing (5 to 7 days), and SPICe+ approval (3 to 5 days). The newspaper waiting period is the longest phase.
Key documents include: partnership deed with amendments, PAN and Aadhaar of all partners, address proof, registered office proof (ownership or rent agreement with NOC), certified statement of assets and liabilities (not older than 30 days), NOC from secured creditors, last 3 years' ITR, passport-size photographs, and affidavit from all partners.
Yes, a partnership firm with loans can convert, but written NOC from all secured creditors is mandatory. The NOC must state that creditors have no objection to the conversion. All existing loan agreements, liabilities, and obligations automatically transfer to the new company under Section 366. Unsecured creditors require a declaration, not a formal NOC.
Yes. The partnership firm's existing GST registration must be cancelled or transferred. A new GST registration is required for the Private Limited Company using AGILE-PRO-S form (integrated with SPICe+). File Form ITC-02 for input tax credit transfer to the new company. Update all invoices with the new GSTIN, company name, and PAN.
A Tax Professional certifies the statement of assets and liabilities (mandatory for URC-1, must be within 30 days) and assists with tax compliance. A Compliance Professional certifies Form URC-1, drafts MOA/AOA, assists with Companies Act compliance, and coordinates MCA filings. Both professionals are essential for the conversion process.
Yes, since August 15, 2018, unregistered partnership firms with 2 or more members can convert directly under Section 366. Prior to this date, only registered firms (under the Indian Partnership Act, 1932) could convert. The unregistered firm must provide a valid partnership deed and proof of business existence to file URC-1.
Under Section 374(b), the partnership firm must publish an advertisement in Form URC-2 in two newspapers circulating in the district of the firm's registered office. One must be an English daily and one in the vernacular language. Publish at least 21 clear days before filing URC-1. Cost is ₹2,000 to ₹5,000 for both publications.
A new PAN is automatically allotted to the Private Limited Company through the SPICe+ filing (integrated PAN application). The partnership firm's old PAN must be surrendered to the Income Tax Department. File final income tax return for the partnership firm up to the conversion date. Apply for new TAN separately if the company deducts TDS.
Total conversion cost ranges from ₹7,999 to ₹25,000 (professional fees) plus government fees. Government charges include: URC-1 filing (₹200 to ₹600 based on authorized capital slab), SPICe+ (₹200 to ₹600), DSC (₹1,000 to ₹2,000 per director), name reservation (₹1,000), newspaper publication (₹2,000 to ₹5,000), and state-specific stamp duty.
Government fees include: Form URC-1 filing fee ₹200 to ₹600 (based on authorized capital slab per Companies (Registration Offices and Fees) Rules, 2014), SPICe+ fee ₹200 to ₹600, DIN is allotted via SPICe+ at no additional cost, name reservation via RUN ₹1,000, and state stamp duty on MOA/AOA (₹300 to ₹15,000 depending on state and authorized capital).
Stamp duty on MOA and AOA varies by state. Maharashtra: ₹5,000 to ₹15,000, Delhi: ₹1,000 to ₹5,000, Karnataka: ₹3,000 to ₹8,000, Tamil Nadu: ₹2,000 to ₹6,000, Gujarat: ₹1,500 to ₹5,000, UP: ₹1,000 to ₹4,000. Rates depend on authorized capital amount. Transfer of immovable property may attract additional stamp duty.
Capital gains tax is exempt under Section 47(xiii) of the Income Tax Act if all conditions are met: all firm assets and liabilities transfer to the company, partners become shareholders in the same proportion as capital accounts, partners hold 50% or more voting power for 5 years, and partners receive no benefit other than shares.
Four mandatory conditions under Section 47(xiii): (a) All assets and liabilities of the firm become company's assets and liabilities, (b) Partners become shareholders in the same proportion as their capital accounts, (c) Partners collectively hold not less than 50% voting power for 5 years, (d) Partners receive no benefit other than shares in the company.
Yes. Business losses and unabsorbed depreciation of the partnership firm can be carried forward and set off against the income of the successor Private Limited Company, subject to conditions under the Income Tax Act. The carry-forward is available for the remaining period of the original 8-year window from the year the loss was first incurred.
IncorpX's professional fee for partnership to Pvt Ltd conversion starts at ₹7,999 (excluding government fees and stamp duty). The package includes partner consent documentation, DSC and DIN application, name reservation, URC-1 and SPICe+ filing, MOA/AOA drafting, newspaper publication coordination, and post-conversion compliance support for 30 days.
Yes. After conversion, the Private Limited Company is subject to Minimum Alternate Tax (MAT) under Section 115JB of the Income Tax Act on book profits at 15% plus applicable surcharge and cess. Partnership firms pay tax at a flat rate of 30%; companies can benefit from lower effective tax rates of 22% or 25% under Section 115BAA/115BAB.
The complete conversion typically takes 15 to 30 working days. Phase 1 (preparation): DSC, DIN, deed review in 3 to 5 days. Phase 2 (name and publication): name reservation and 21-day newspaper waiting period in 22 to 25 days. Phase 3 (filing): URC-1 and SPICe+ filing and ROC approval in 7 to 10 days.
Section 366 conversion registers the existing partnership as a company, preserving business continuity with automatic transfer of assets, liabilities, and contracts. Fresh incorporation creates a new company under Section 7 and transfers business via slump sale agreement. Section 366 is faster (15 to 30 days vs 30 to 60 days), has no tax leakage, and maintains pending legal proceedings.
Key differences: Liability is unlimited in partnership vs limited in Pvt Ltd. Governing law is Indian Partnership Act, 1932 vs Companies Act, 2013. Members: partnership has 2 to 50 partners; Pvt Ltd has 2 to 200 shareholders. Perpetual succession: partnership dissolves on partner exit; Pvt Ltd continues. Fundraising: Pvt Ltd can issue equity; partnerships cannot.
Choose Pvt Ltd if you plan to raise equity funding, issue ESOPs, add investors, or scale beyond 20 partners. Choose LLP if you want limited liability with lower compliance costs and no plans for equity fundraising. Pvt Ltd has more annual compliance (8+ filings/year) but enables share issuance. Compare Partnership to LLP conversion.
Section 366 is recommended for most firms. Advantages: automatic transfer of all assets and liabilities, no separate transfer deeds needed, pending legal proceedings continue, brand continuity, and capital gains exemption under Section 47(xiii). Slump sale requires separate asset transfer agreements, may trigger stamp duty on immovable property, and takes 30 to 60 days longer.
The most common mistakes include filing URC-1 before the 21 clear days newspaper waiting period, using a professional certificate older than 30 days, missing the conversion clause in the partnership deed, not obtaining written creditor NOCs, and allocating shares in a ratio different from capital accounts (which voids the Section 47(xiii) exemption). These mistakes cause delays of 2 to 4 weeks.
Yes. IncorpX provides a 100% money-back guarantee on professional fees. If your URC-1 filing is rejected due to an error attributable to IncorpX, we re-file at no cost. If the re-filing also fails due to our error, you receive a full refund of the professional fee paid. Government fees and stamp duty are non-refundable. The guarantee is valid for 90 days.
IncorpX's conversion team includes 12 qualified Tax Professionals, 8 Compliance Professionals, and 5 Advocates. The company is ISO 9001:2015 certified and has completed 850+ partnership to company conversions since 2019. All filings are reviewed by a senior professional before submission to the ROC.
The team was very responsive and helpful. I received daily updates from the WhatsApp group, and their guidance made everything much simpler to comprehend. If you want a simple and hassle-free way to launch your business, I would highly recommend them!
S
Simon Job
4.9/5
I recently used IncorpX to register my limited liability partnership, and I had an amazing experience! There were no hidden fees, and the team was helpful, quick to respond, and open. They provided thorough explanations of each step, and their services are reasonably priced without sacrificing quality. The entire process was made simple by IncorpX's professionalism, attention to detail, and sincere support. Strongly advised!
J
Jay R
4.8/5
The experience was flawless; the team completed each task with care and always responded quickly. Throughout the process, I never felt stuck. We would especially like to thank Saksham and Sriram for making everything run so smoothly! The IncorpX team offers extremely competitive pricing; anyone just starting out should definitely get in touch with them.
M
Mohammed Affan
4.9/5
I'm really grateful to the wonderful team at IncorpX for helping bring my co-founder's and my dream to life. The whole process was super smooth - fast service, great support, and no hassles at all. I'd highly recommend IncorpX to any new entrepreneur or founder looking to register their company. Excited to continue working with them in the long run. Thank you, IncorpX!
R
Riyom Taipodia
4.6/5
One of the best agency I have ever experienced. Team members are very friendly as if we know each other from before and came communicate and share easily. My work has been done in a very short period and I am so happy. Thank you so much.
A
Ayyappa Swamy
5/5
Highly recommend... IncorpX services regarding incorporation of our company and roc filing and all are very impressive.. the team IncorpX is polite and friendly. Our Lands Time pvt ltd has incorporated through IncorpX... And thanks to IncorpX team..
R
Ramesh Babu
4.9/5
Trouble free service, Rendering good co-operation for company incorporation. Trust worthy team to have better knowledge.
P
Pravesh Kudesia
5/5
IncorpX is providing best service... And user experience! Thank You IncorpX Team
B
Balaji Gutte
4.9/5
I recently got my Private Limited Company incorporated through IncorpX, and the experience was seamless! The team was professional, supportive, and quick to respond throughout the process. Highly recommend IncorpX for a smooth and stress-free company registration experience.
D
Dia
5/5
I'd been planning to register my Private Limited Company for months but didn't know where to start - until I found IncorpX. The team guided me step by step, explained everything clearly, and completed the registration smoothly within the promised timeline. Their pricing was transparent with no hidden charges. Highly recommend IncorpX to anyone starting a business!
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