Initially, when a business is established, the most preferred choice is a sole proprietorship structure because of its low compliance requirements. Once the business grows, it is essential to take steps to limit the liabilities and reduce the burden of compliance on a single person. The best way out over here is to convert proprietorship to private limited company. For the purpose of conversion of sole proprietor to a private limited company, it is necessary by the promoters of the company to indulge into an agreement which is to be made for selling the business. Further, such conversion from sole proprietorship to Private Limited Company must have clearly mentioned about “the takeover of a Sole Proprietorship Concern” as one of the objectives in its Memorandum of Association.