Partnership firm

Querist : Anonymous (Querist) 08 May 2024 This query is : Resolved
We have partnership firm we need to merge with another private ltd company
1.with no tax or with minimal tax
2.what are the procedures to be followed
3. which is the best alternative
i) converting the firm into a pvt td company
ii) purchasing assets and liabilities of the partnership firm

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T. Kalaiselvan, Advocate (Expert) 08 May 2024
A partnership with seven or more partners, registered under the Partnership Act, can be converted into a company by the following procedures under Part IX of the Companies Act; generally known as Part IX Conversion.
By converting a firm into a company, the partnership can avail the benefits of a company. This method is preferable if the partnership firm has immovable assets in the name of the firm. Through Part IX conversion, such immovable assets are automatically transferred to the new company and no stamp duty is payable for such transfer of assets.
The second method of conversion involves the takeover of business of the existing firm by a new company, after relevant provisions for a takeover are included in the ‘object’ clause of the company’s constitution documents. Once incorporation of the new company is complete, all assets and liabilities of the partnership firm are transferred to the company by way of an agreement; and shares of the new company are issued to the partners of the firm as consideration for the takeover.

Querist : Anonymous (Querist) 08 May 2024
Thank you so much sir
our partnership firm is unregistered so which method is preferable for tax benefits
Conversion to pvt ltd and merge with pvt ltd or takeover of assets and liabilities

T. Kalaiselvan, Advocate (Expert) 09 May 2024
Unregistered partnerships can be converted into a limited company.
Please follow Section 366 of Companies Act, 2013, read with Companies (Authorised to Register) Rules, 2014.