Legal way for carry forwarding credentials
A Firm " H.S. Construction" is a proprietor ship firm, deals with contract business under company.
Under the same firm two new partners included, partnership deed has been made and it has converted into a partnership firm. Is their any legal law/way to prove that, we are liable to carry forward the credential,goodwill and other details of the proprietorship firm to partnership firm?If yes, kindly suggest me the act,adjournment,acts under which it will be proved?
Asked 2 years ago in Business Law from Farakka, West Bengal
1) The partnership firm had taken over the business of the assessee as a running business together with all the assets and liabilities of that business.
2) goodwill is the value of reputation of properietory concern for earning profits
3) consideration received on transfer of business would include the goodwill, receivables, work in progress and all other rights and entitlements of the Seller's business.
1. Get your partnership firm registered under the Partnership Act, 1932.
2. If your proprietorship firm was registered with service tax, sales tax, VAT etc. than you have to submit the necessary information of change of status of your proprietor firm to that of Partnership firm in prescribed forms.
3. Obtain the new PAN for the partnership firm.
4. All the assets and liabilities of the proprietorship firm become the assets and liability of the partnership firm.
Advocate, New Delhi
Sir, tell me if the Credential of the Proprietorship firm should be carry forwarded to Partnership firm? If so kindly mention the act,by which it can be presented before company official ? the point of concern is the credential . Kindly have your advice on that.
Asked 2 years ago
1) the credentials of proprietor concern should be carried forward to partnership firm
2) Gujarat High Court in Sitaram Motiram Join v. Commissioner of Income-tax. That court said :
"Where an individual incurs loss in a business carried on by him as sole proprietor and a registered firm of which he is a partner takes over his business as a running business together with all its assets and liabilities, he has a right to have the loss carried forward and set off, under section 24(2) of the Indian Income-tax Act, 1922, against his share of the profits of the registered firm. The business remains the same for the purpose of section 24(2) (ii) and the identity of the business does not change by reason of the change in persons who carry on that business. The business also continues to be carried on by that individual; for, a business carried on by a firm is a business carried on by the partners of the firm and one partner is the agent of the others in carrying on that business, and when a partnership carries on a business each partner thereof carries on that business" (Head-note).
1. The rights and liabilities have been transferred to the successor entity i.e partnership firm unless they have been discharged in accordance with the law.
2. Change in the legal character of the entity does not extinguish the rights and liabilities if they have been saved by the partnership deed.
The credential of the proprietorship company will remain with that company itself, it should not be carried forward to the partnership company though the the same was converted into partnership company from proprietorship.
The partnership agreement terms and conditions if so drafted to accommodate the credentials and the goodwill of the erstwhile proprietorship company, this may be carried forward or else it can be estaished separately in another company that can be formed o that line not contradicting the conditions of the presently formed partnership company.
1. In the Partnership Deed itself it can be mentioned that the proprietorship concern being " H.S. Construction" is being converted to Partnership Firm,
2. So, it is logical and natural that the nely converted Partnership Form retains all the goodwill, assets and liabilities of the said pripotietorship concern.
1. The Proprietorship Concern with not only the credentials but the entire assets and liabilities of the erstwhile Proptrietorship concern will be converted to the said Partnership Firm as per the Partnership Deed,
2. Draft the said Partnership Deed accordingly.