Today we are talking about how to convert Sole Proprietorship firm into partnership firm. A Sole Proprietorship may be simple to start, but it can restrict your growth in terms of business. As it is difficult for a single person to build a big business as you have to take care of the management of the business, business cost, and you also have to bear losses. You must consider getting a partner to help you manage the Business. But if you thought to add a partner to the business, can be difficult and will take a longer time, as you have to complete all legal formalities, then we would like to tell you that you have an option of converting sole proprietorship into partnership firm.

What is the procedure for Conversion of Sole Proprietorship to Partnership?

Drafting of Partnership Deed:

The first step for converting any sole proprietorship into a partnership begins with the drafting of the partnership deed for your firm. The partnership deed shall contain full details of all the partners, the name under which the partnership firm shall be carried on and the profit and loss sharing ratio.

Declaration of Transfer: The deed will be different from regular partnership deed as it will contain various information regarding the proprietorship business and will also contain a declaration that the proprietorship business has been transferred to the partnership firm.

Important Inclusions:  The information that will be included in the deed is the date of formation of the sole proprietorship business, the name of the proprietor, type of business which is carried on, or any other detail such as registration number, Bank Account Details.

Date of Starting: The deed shall also include the date when the partnership firm shall be started and also the details of all the partners of the firm.

Investment Details: Deed should also include the capital investment by each partner, and the profit and loss sharing ratio, should also contain detailed information regarding the procedure to be followed in case of retirement of any partner.

It should also state regarding the changes that will take place on account of the introduction of a new partner in the business. If there is a change in registered address of the firm that should also be included.

Conclusion

The Sole proprietorship firm is very easy to set up and run. You do not require to do a lot of paperwork to form this type of business. The sole proprietor is the sole person who will enjoy profits and will bare losses that occur in the Business. A sole proprietorship does not require you to have employees also you might recruit people or you can do business by yourself.

The Sole Proprietorship is ideal for small businesses and startups. Its characteristics have so many advantages but these advantages can sometimes become the disadvantage as sometimes it is hard to run a business alone that were getting a partner to help you in Business become very essential. That why it is recommended to convert your proprietorship firm into partnership firm.

For any Legal support, we will be happy to help you. Contact BDS Legal Services now.

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