Why can't a proprietorship simply convert into a company?
A proprietorship is you, trading under a business name. It has no registration of its own under company law, so there is nothing to convert. The Companies Act, 2013 provides conversion routes for some existing bodies, but a sole proprietorship is not one of them. The practical route is a takeover: the new company buys or receives the business, usually in exchange for shares issued to you.
What are the steps to move from a proprietorship to a Pvt Ltd?
- Incorporate the company through SPICe+, with at least two directors and two shareholders. Include taking over your proprietorship's business in the objects. See documents for company registration.
- Sign a business transfer agreement listing the assets, stock, liabilities, contracts and the date of transfer, and the shares or payment you receive.
- Register the company for GST in every state where it will operate. The company's GSTIN is new; the proprietor's GSTIN cannot be moved.
- Transfer unused input tax credit from your GSTIN to the company's on Form GST ITC-02, before you cancel your registration.
- Cancel your proprietorship GSTIN on Form GST REG-16, giving transfer of business as the reason.
- Assign your trademark to the company on Form TM-P (₹9,000 per mark online), because the mark is in your personal name.
- Move marketplace, payment and bank accounts, update Udyam and licences, and tell suppliers and customers the new invoicing details.
Can the move be tax-neutral?
Under the old Income-tax Act, section 47(xiv) treated the transfer of a proprietary concern to a company as not a taxable transfer, if all of these were met:
- All the assets and liabilities of the proprietorship become the company's.
- You hold at least 50% of the company's total voting power and keep it for five years.
- You receive nothing in return except shares in the company.
The Income-tax Act, 2025, in force from 1 April 2026, carries this exemption forward with the same core conditions, and a breach within five years can bring the tax back. Ask your CA to confirm the current section and conditions before you sign. On the GST side, transferring a business as a going concern is exempt from GST, and stamp duty on the transfer agreement depends on your state.
What happens to your GST balances and TCS?
Form ITC-02 moves unused input tax credit in your electronic credit ledger. It does not move your electronic cash ledger, which is where marketplace TCS sits. Use that cash balance against your last returns or claim it as a refund before cancelling. See what happens to unused TCS credit. File all pending returns first; the cancellation also requires a final return.
What happens to your Amazon or Flipkart account?
Marketplaces tie a seller account to the legal entity, PAN and GSTIN. In practice a change from proprietor to company means a new seller account, and your listings, ratings and reviews do not move automatically. Plan an overlap: open the company's account, get your brand approved there, then move stock and close the old account. If you use Brand Registry, the trademark assignment has to be recorded before the company can take over as the brand owner.
When is the right time to convert?
- A co-founder is joining, or an investor wants shares.
- You hold significant stock on credit or sell higher-risk products, and want limited liability.
- Profits are high enough that the company tax rate, after salary and dividend, works out better. A CA should run your numbers.
- A lender, large buyer or marketplace programme asks for a company.
If none of these apply, staying a proprietor is often cheaper. Our structure comparison and OPC vs proprietorship guide cover the trade-offs, including moving to an OPC or LLP instead, which follows the same takeover logic.
What we'd check in your case
- Your stock, receivables and liabilities on the transfer date, and whether all can move to the company.
- Your shareholding plan, so the tax-neutral conditions hold for five years.
- Your GST position: pending returns, credit ledger and cash ledger balances.
- Which marketplace accounts and brand approvals need to be rebuilt, and in what order.
- Whether your trademark is filed and ready to be assigned.
Send us your current setup on WhatsApp and we will map the move with dates and a fixed written quote, or tell you plainly if it is too early to switch. See our business registration service.
Not sure how this applies to you? Tell us what you sell and where. We'll tell you what you need, and what you don't, in a free 15-minute fit check.
Ask on WhatsAppRelated questions
Can I convert my proprietorship into a Pvt Ltd without paying capital gains tax?
Yes, if the conditions for the proprietorship-to-company exemption are met: all assets and liabilities move to the company, you hold at least 50% of the voting power for five years, and you receive only shares. Confirm the current section of the Income-tax Act, 2025 with your CA.
Can I keep my GST number after converting to a company?
No. The company has its own PAN, so it needs its own GSTIN. You transfer unused input tax credit on Form ITC-02 and then cancel the proprietorship's registration.
Do I need a new Amazon seller account after converting?
Usually yes. Marketplace accounts are tied to the legal entity, PAN and GSTIN, so the company opens its own account. Plan the overlap so you do not stop selling.
What happens to my trademark if I convert to a Pvt Ltd?
A proprietor's trademark is in the proprietor's personal name. Assign it to the company with an assignment deed and Form TM-P, which costs ₹9,000 per mark for online filing.
Can I convert a proprietorship into an LLP or OPC instead?
Yes, through the same takeover approach: form the new entity and transfer the business to it. Which structure fits depends on co-founders, investors and how much compliance you can handle.
See our service: Company registration for e-commerce →
Sources
- Income Tax Department: section 47 (transactions not regarded as transfer)
- TaxGuru: takeover of a proprietorship by a private limited company
- CBIC: CGST Act and other GST Acts
- MCA: AGILE-PRO-S and SPICe+ incorporation
- S.S. Rana: trademark assignment fee (Form TM-P)
General information based on rules as of November 2026, not legal or tax advice for your specific case. Rules change; we confirm what applies to you before any filing.