There are limitations on Preparatory form such as capital, lack of transferability, unlimited liability etc when the
firm grows it is inevitable on the part of businessman to get it converted into company.
1. Transfer of assets and liabilities
2. All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
3. No Stamp Duty
4. No stamp duty is required to be paid on transfer of business.
5. No Capital Gain Tax.
6. conversion doesnt attract capital gain tax.
7. Carry Forward and Set off Losses and Unabsorbed Depreciation.
8. When we transfer business from proprietor to company losses and depreciation can be transferred to the company.
Conditions Subject To Which Transfer Is Complete
The Proprietor receives consideration only by way of allotment of shares in company.
The Proprietor share holding in the company in aggregate is 50% or more of its total voting power and continue to be as such for 5 years from the date of conversion.