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CS Executive · Setting Up of Business, Industrial and Labour Laws · Conversion of Business Entities

Anil, a sole proprietor, wishes to carry on his business through a company. Which statement is most accurate about the approach, in the context of the official text on conversion of firms and companies?

Section 374 of the Companies Act, 2013 sets the obligations on registration under that Part, including an affidavit from members or partners to submit documents for dissolution of the earlier entity. The LLP Act's Section 58 deals with conversion into an LLP, not a company.

  1. ASection 374 deals with registration under that Part by a company formed from entities such as partnership firms, and requires an affidavit from members or partners for dissolution of the earlier entityCorrect
  2. BSection 58 of the LLP Act, 2008 converts a sole proprietorship directly into a company
  3. CSection 378 requires every sole proprietor to wind up before incorporation
  4. DA firm that becomes an LLP automatically becomes a company on the certificate date

Explanation

Section 374 sets the obligations for registration under the relevant Part, including the affidavit about dissolution of the earlier entity. Section 58 of the LLP Act relates to conversion into an LLP, not into a company, and Section 378 only saves enactments on winding up. Hence the first option is the only correct one.

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