How to Convert a Partnership Firm into a Private Limited Company in India

Most partnership firms begin as a simple arrangement between founders eager to get up and running quickly, sharing the workload, and avoiding too much bureaucracy. This structure often starts to inhibit growth as the business scales. A partnership firm exposes partners to personal liability, restricts fundraising, and usually lacks governance expected by investors or larger clients.

A private limited company offers a more scalable structure. It provides limited liability, stronger governance, better fundraising opportunities, and a separate legal identity that continues even if ownership changes. Conversion thus allows an existing partnership firm to shift into a company format without disrupting day-to-day business. The Companies Act, 2013 provides a clear route for this transition through the ‘authorized to register’ mechanism.

The following guide outlines the process of converting a partnership firm to a private limited company, along with eligibility criteria, documents required, step-by-step process, tax and accounting implications, and frequently asked questions by the founders and business owners.

If you are still at the evaluation stage for determining whether a partnership structure is suitable for your long-term goals, then take a look at our detailed comparison between private limited company and partnership firm, which will help you understand how governance, compliance, and liability differ across the two structures.

The Companies Act, 2013 facilitates this transition through Section 366, which outlines the “authorised to register” mechanism. This provision allows an existing partnership firm to convert into a private limited company while ensuring uninterrupted business continuity.

Why Businesses Convert a Partnership Firm into a Private Limited Company

Businesses usually consider this shift for the following reasons:

1. Limited liability

Partners in a firm are personally liable. A private limited company limits liability to the extent of shareholding.

If you want to understand the current obligations of partners, our guide on rights and responsibilities of partners in a partnership firm offers a clear overview of the liability framework you are transitioning away from.

2. Separate legal identity

A private limited company exists independently of its owners, which strengthens trust and credibility with customers, lenders and other stakeholders.

3. Better access to funds

Banks, NBFCs and investors prefer lending or investing in private limited companies due to their governance requirements and transparent ownership structure.

4. Easier ownership transfer

In a firm, adding or removing partners requires significant changes. In a company, this is handled smoothly through share transfers.

5. Long-term continuity

A company continues to exist even if directors or shareholders change, making it easier to plan for succession and growth.

Can Any Partnership Firm Be Converted

The law allows both registered and unregistered partnership firms to convert into a private limited company, provided the firm can submit documents proving its existence and financial activity.

Registered partnership firm

A registered firm can directly apply for conversion by submitting its partnership deed and registration records.

Unregistered partnership firm

An unregistered firm can also convert, but must provide supporting documents such as:

• Partnership Deed
• Financial Statements
• Proof of principal place of business
• List of partners and contribution details

The firm’s current partners generally become the shareholders of the new company based on the agreed shareholding pattern.

If you want a quick refresher on the different categories of partnerships, check out our guide on types of partnership firms and partners in India, which explains the variations in constitution and partner roles.

Eligibility & Pre-Conversion Checklist

• Partners have passed a resolution approving conversion.
• At least two partners are willing to become directors.
• At least one proposed director is a resident of India.
• Shareholding pattern agreed between partners.
• No asset revaluation within the last three years.
• Secured creditors, if any, have given NOC.
• Name availability checked and an approved name is ready to reserve.
• Digital Signature Certificates obtained for all proposed directors.
• DINs in place for proposed directors, or to be allotted through SPICe+ for those who do not have one.
• Registered office address decided and supporting documents available.
• For registered partnership firms: NOC from Registrar of Firms prepared.
• Newspaper advertisement requirement understood and planned.

Documents Required for Conversion

The following documents must be prepared and submitted when applying to convert a partnership firm into a private limited company:

Partnership & Firm Documentation

• Partnership deed and any supplementary deeds
• Certificate of registration of the partnership (if registered)
• Financial statements of the firm
• NOC from Registrar of Firms (if applicable)

Director & Member Documentation

• Identity and address proofs of all proposed directors
• DIR-2 consent to act as director
• INC-9 declarations (auto-generated in SPICe+)
• A duly verified list of all partners who will become shareholders, along with their proposed shareholding
• A duly verified list of the company’s proposed directors
• Consent of each director to act as a director

Statutory Declarations & Approvals

• Declaration under Section 366 confirming compliance with all applicable conditions
• Affidavit from all partners affirming the accuracy of submitted information
• NOC from secured creditors, if any

Financial & Capital Structure Documents

• CA-certified statement of the firm’s assets and liabilities
• Statement of nominal share capital and number of shares taken

Registered Office Documentation

• Proof of registered office (utility bill, rent agreement, NOC from owner)

Public Notice Requirement

• Copies of the newspaper advertisements published in English and vernacular languages

Company Incorporation Documents

• Draft MOA and AOA with signed subscriber sheet

These documents collectively form the core attachments to URC-1 and SPICe+, enabling the Registrar of Companies to verify eligibility and process the conversion.

For a detailed understanding of incorporation documentation, read our guide on documents required for private limited company registration in India.

How to Convert a Partnership Firm into a Private Limited Company: Step-by-Step Guide

Step 1: Pass a resolution and obtain partner approval

Partners must hold a meeting and formally approve the conversion. A resolution is passed and specific partners are authorised to complete filings and sign documents.

Step 2: Obtain DSCs and DINs for proposed directors

Every proposed director must have a valid Class III Digital Signature Certificate (DSC) since all incorporation forms are submitted online.

To understand how DSCs work in the company registration process, see our detailed article on digital signature certificates.

Directors also require a Director Identification Number (DIN). DINs may already be available for some directors, or they can be generated through SPICe+ Part B during incorporation or obtained separately when needed.

For a quick overview of DIN requirements and compliance rules, read our write-up on DIN number application and mandatory compliance.

Step 3: Apply for Name Reservation

The proposed company name must be reserved through the RUN service or SPICe+ Part A before filing the conversion application. The Ministry of Corporate Affairs has specific rules on name availability, similarity checks and permitted terms. For a quick overview of these requirements, refer to our guide on how to reserve a company name.

Step 4: Publish newspaper notice under URC-2

A public notice must be published in one English and one vernacular newspaper. This informs the public about the proposed conversion and allows a minimum of 21 days to raise objections, if any.

Step 5: Prepare Conversion Documentation

During the notice period, prepare the following required documents:

• MOA and AOA
• Subscriber sheet
• CA-certified asset and liability statement
• Partner consents and affidavits
• NOC from creditors
• NOC from Registrar of Firms (if required)
• Identity proofs
• Proof of office address

Step 6: File URC-1 with SPICe+

The authorised partners must file Form URC 1 along with SPICe+ Part B and all supporting documents. These forms collectively request the Registrar of Companies to register the firm as a private limited company.

URC-1 is filed along:

• SPICe+ Part B
• e-MOA and e-AOA
• INC-9
• DIR-2
• Newspaper advertisements
• Financial statements
• Lists of directors and shareholders

SPICe+ is the integrated incorporation form that captures details of directors, shareholders, capital structure and statutory registrations. Since the conversion process relies on SPICe+ Part B along with URC-1, understanding the form structure helps avoid errors during filing. For a detailed explanation of each section of the form, you can refer to our guide on SPICe+ for company registration.

Step 7: ROC review and approval

The Registrar examines documents, confirms compliance with eligibility conditions and verifies the advertisement and declarations. If all requirements are met, the Registrar issues the Certificate of Incorporation.

Step 8: Complete post-incorporation updates

After incorporation, the business must then update:

PAN

After conversion, the new company must obtain a fresh PAN since the legal entity changes.

TAN

A Tax Deduction and Collection Account Number (TAN) is required for making TDS payments in the company’s name.

GST Registration

When a partnership firm converts into a private limited company, its GST registration cannot simply be amended. The new company must obtain a separate GST registration to operate compliantly.

Bank Accounts and Licences

After incorporation, the company must update its banking arrangements and statutory registrations to reflect the new legal entity. This includes opening or modifying bank accounts in the company’s name and updating invoices, contracts, licences and other statutory records so they correspond to the private limited structure.

Annual Compliances

Once the partnership firm is converted, the new company must follow annual compliance requirements under the Companies Act, including ROC filings, board meetings, audit obligations and disclosure formalities.

Tax Implications on Conversion of Partnership Firm into Company

Tax impact is a common concern when converting a partnership firm into a private company. Key points include:

No capital gains on transfer of assets

Since assets and liabilities vest in the company by operation of law, there is generally no capital gains tax triggered solely due to conversion.

Corporate tax regime applies after conversion

After conversion, the company will be taxed at corporate tax rates rather than partnership tax rates.

Profit distribution rules change

Partners receiving remuneration or interest in the firm will instead receive returns through shareholding mechanisms such as dividends.

To understand how rights and financial benefits change, you may also explore our guide on remuneration to partners in a partnership firm, which differs significantly from profit distribution in a company.

Carry forward of losses

Losses or unabsorbed depreciation may be carried forward subject to conditions. It is advisable to review this with a tax professional.

These points help businesses understand the tax implications on conversion of partnership firm into company in a practical way.

Accounting Impact of Conversion

Conversion also affects the accounting treatment and reporting requirements. Key items include:

• Preparing a closing financial statement for the firm
• Transferring assets and liabilities to the new company’s opening balance sheet
• Aligning accounting policies with Companies Act requirements
• Ensuring compliance with mandatory audit requirements
• Updating depreciation schedules under company law

These steps ensure a smooth shift from partnership accounting to corporate accounting.

Convert Partnership Firm into a Pvt Ltd with LegalWiz.in 

Converting a partnership firm into a private limited company is a strategic step for businesses that want to strengthen their structure, limit personal liability, and prepare for long-term growth. The process of conversion basically involves approvals, documentation, and statutory filings; however, the transition itself is designed in a way that business continuity is maintained. Once converted, the company enjoys better credibility, smoother fundraising opportunities, and a governance framework that supports expansion.

The most challenging part is often coordinating the documents, navigating SPICe+ and URC-1 requirements, and ensuring all post-incorporation updates are done right. At LegalWiz, we help founders and growing businesses day in and day out to simplify workflows of company registration, clarify requirements over documentation, and support ongoing compliance needs. With crystal clear guidance at each step, businesses can confidently execute the conversion and start operating under the private limited structure with clarity and stability.