Are you planning to convert your partnership firm into a Limited Liability Partnership (LLP)?
If Yes, then you're at the right place!
LLP has more benefits than partnership firms because it's a legal entity status that allows you to adopt many partners and more flexibility. In addition, it has many other effects of converting into a Limited Liability Partnership (LLP).
This guide discussed everything about LLP, its effects, and how to convert partnership firms into LLPs.
Without any further delay, Let's begin!
Why is LLP better than a Partnership firm?
There are numerous reasons to consider LLP over partnership firms. Let's see:
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You can get unlimited partners in LLP
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The partners' liability is fixed to the amount of capital contributed.
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No minimum limit for capital contribution
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LLP is a body of corporate
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LLP has perpetual succession so that the death of partners doesn't affect the existence
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It has higher creditworthiness.
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Comes with complete flexibility in managing business
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Foreign Direct Investment (FDI) in LLPs allowed
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Its structure suits PE funds, joint ventures, and venture capital funds.
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LLP can compromise, merge, and arrange easily
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Professionals of various disciplines can work together in an LLP
Effects of Conversion of Partnership firm into LLP
When a Partnership firm switches to LLP according to section 55 of the LLP Act, 2008, this adaption comes with various benefits. A company obtains legal entity status and allows the adoption of unlimited partners.
Let's see the effect of the conversion of a partnership firm into an LLP:
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Transfer of License, Registration, and Property: All the licenses, approvals, permits, or registration issues in the Partnership will not be transferred automatically to the LLP. If any property is registered under the Partnership, the LLP must approach authorities to take action and transfer the assets to the LLP. Before switching to LLP, it's essential to clarify all the aspects of licensing and registration for LLP.
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Pending proceedings: According to paragraph 9 of the second schedule of LLP, all the proceedings against the firm cases pending in the court or tribunal should be continued, complete, or enforced by the Limited Liability Limited Partnership.
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Section 58(4) of the LLP provides that on and from the date of registration: The assets, liabilities, rights, and obligations of the partnership firm are entirely transferred to the Limited Liability Limited Partnership but don't affect any existing contract, employment, agreement, etc. There must be a name specified in the certificate of registration.
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Partner liable for the obligation of a firm before conversion and Liabilities: According to section 16(1) of the 2nd schedule of the LLP, anything in Partnership that is converted into LLP continues to be personally liable to the firm:
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Which was incurred before the conversion (or)
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Which arose from any contract entered into before the conversion.
What are the Requirements to convert a Partnership firm into LLP?
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Up-to-date filing of income tax returns
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Minimum two designated partners
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Make sure that one partner is an Indian
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The partners and selected partners can be the same person
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No concept of share capital, but it has a sort of contribution from each Partnership
What are the Conditions required to convert a Partnership firm into LLP?
There are some conditions a partnership firm should follow to get converted into a Limited Liability Partnership (LLP):
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The firm may or may not be registered with the registrar's firms.
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There must be the consent of all the partners.
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All the partners become partners in LLP in the same proportion with a capital account from the conversion date.
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Every partner must contribute to the Limited Liability Limited Partnership.
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DIN should be acquired for all the selected partners.
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DSC (Digital Signature Certificate) is required for at least one designated partner.
What is the Process for converting a partnership firm into an LLP?
Step 1 - Apply for DIN
First, you need to obtain a DIN for the company's partners.
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If there are only two designated partners, then you'll get DIN with the incorporation form (FiLLiP)
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You must obtain DIN for other selected partners if there are more than two selected partners.
Step 2 - Apply for Name Approval
Login to MCA Website: Applicant has to log into their account on the MCA Website (Whether you can make a new account or you can log in existing account)
After login, click the icon RUN in the MCA service. Applicants have to fill in the information online.
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Details required to fill online form:
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Entity type LLP
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LLPIN
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Proposed name
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Comment
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Choose File
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Choose File: With this option, you can upload the PDF document.
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Submission of Form on MCA Website: Now submit the form to the MCA website.
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Payment of Fees: You must pay the fees immediately after submitting the form.
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Validity of reserved name: It will be valid for ninety days from the date of acceptance.
Step 3 - Apply for DSC (Digital Signature Certificate)
It would help if you got a DSC for designated partners for digital authentication. You can only use valid digital signatures issued to you, but make sure you're not using any other digital signature.
Step 4 - Filing of form with ROC
You need to follow the below forms with attached files with the ROC required for converting the partnership firm into an LLP.
1. Form-17:
Application for conversion in Form 17 is essential to fill by the partners, including the required attachments:
Statement of the consent of all Partners
List of all unsecured creditors with their support to conversion
Statement of liabilities & assets of the company duly certified by CA
Approval from anybody/ authority may require
Disclosure for Part B of Form 17 by selected partners
Copy of acknowledgement of ITR
2. Form- FiLLiP:
You need to fill out this application by the partners with the following attachments:
Proof of office address
NOC from the owner of the property
Copy of the utility bills
Subscriber sheet, including consent
Proof of identity and residential address
All designated partners' digital signature
Details of LLP or company in which partners/designated partners are director/partner
Copy of approval in case of the proposed name
Form 9 consent to act as selected partners
Step 5 - Issue Registration Certificate of LLP
Section 58(1) of the LLP Act issues that the registrar has complied with the provisions of the second schedule to the requirements of Limited Liability Limited Partnership under the rules made. Accordingly, the registered documents were submitted under a program and issued a registration certificate.
Step 6 - Draft LLP Agreement
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Name of LLP
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Name of Partners/Designated Partners
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Form of contribution
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Profit-sharing ratio
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Rights and duties of partners
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Proposed business
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Rules for governing the LLP
Step 7 - Filling out e-form LLP-3
This form provides information in respect of the LLP Agreement between the partners.
Step 8 - Intimate the registrar of firms
According to paragraph 5 of the second schedule, the LLP, within 15 days of the date of registration, registered under the provisions of the Indian Partnership Act, 1932, with the required attachments:
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Copy of certificate of incorporation of LLP
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Copy of incorporation documents submitted in fillip
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These are eight steps for converting a partnership firm into an LLP.
Final Verdict
The Process of converting partnership firms into LLPs can be complex. In that case, you can hire a professional business consulting firm like LawgicalIndia to help you register LLP to convert partnership firms into LLPs. Our team of professionals can handle your documentation and help you convert partnership firms into hassle-free LLP registers. So contact us today for LLP registration to convert your partnership firm into LLP at affordable prices.
