Partnership to LLP
Under a Limited Liability Partnership (LLP), two or more partners form a special partnership and have limited liabilities. For conversion of partnership firm into LLP, you need to get a Digital Signature Certificate, a DPIN and file the LLP forms 2, 3 and 17.
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Introduction
In comparison to a standard partnership, a limited liability partnership (LLP) can be shown to be a far better business structure. Personal liabilities have an impact on partnerships, and LLPs governed by the Limited Liability Partnership Act of 2008 do away with the shortcomings of the Indian Partnership Act of 1932’s overbearing requirements. In addition, there are tax advantages, no audit obligations below a specific capital threshold, no partner cap, and no capital contribution restrictions. Read through to know more about the conversion of the firm into an LLP.
Why choose LLP over a Partnership Firm?
Apart from the key differences, there are a few features that make the LLP a more desirable option over a standard partnership firm:-
- Freedom of Management/Flexibility: The partners are given a reasonable level of flexibility in conducting the operations and running the day-to-day affairs of the LLP. The LLP Agreement is not mostly influenced by the Limited Liability Partnership Act, of 2008, which means to say that the Act is comparatively flexible on how the agreement can be drawn up.
- Perpetual Succession: Unlike in the traditional partnership, the death of the partner does not affect the existence of the LLP. The separate legal entity feature of the LLP allows it to carry on business.
- Investment Attraction: Foreign investors and venture capital funds look at LLPs as an investment opportunity as it has a corporate structure and is more organized as opposed to traditional partnerships.
- Multidisciplinary LLPs: Professionals of various disciplines can work together in an LLP, which is an exclusive feature and an advantage in itself.
Conditions For Converting a Partnership Firm to LLP
- The conversion of a partnership firm to an LLP shall be done as per Section 55 of the Limited Liability Partnership Act 2008 read with Schedule II of the Act.
- All the partners of the firm shall be the partners of the LLP, which means there shall be no new partners or the existing partners cannot cease to be partners while making the application
- All Partners must hold a valid Digital Signature Certificate (DSC) and at least two partners must have a DPIN before making such an application.
- The partnership firm to be converted must be registered under the Partnership Act, of 1932.
- All the partners’ consent must be obtained.
- The LLP must have the same partners as the partnership firm. Any partner that wishes to be removed from the LLP may be removed after the conversion is complete.
- Director Identification Number (DIN)/Designated Partner Identification Number (DPIN) must be obtained for all Designated Partners.
We can draft the LLP agreement, which is a crucial document that outlines the terms and conditions of the LLP.
Eligibility for conversion:
An existing partnership firm may apply to convert into a limited liability partnership if and only if the partners of the limited liability partnership into which the firm is to be converted, comprise, all the partners of the firm and no one else.
Other important points to be kept in mind before application:
- There should be consent in writing from all the Partners for conversion.
- Every partner should contribute to the LLP in the same proportion in which their capital accounts stood in the books of the firm.
- The partnership firm shall file up to the date Income Tax Returns; iv. There shall be at least 1 designated partner Resident in India.
- The consent of all the secured creditors shall be obtained before applying for conversion.
- The Digital Signature of at least one of the Designated Partners is required to be obtained.
The prior approval or NOC, if any is required shall be obtained by the requisite department.
Procedure for Conversion of a Firm From Partnership to LLP
We can assist with obtaining necessary approvals from the partners, creditors, and other stakeholders before the conversion. We can also advise on any legal or regulatory requirements that need to be fulfilled before the conversion.
Step I – Name Approval and DSC
(A.)Name Approval
- Register and subsequently log on to the MCA portal.
- Under the MCA Services tab, the “RUN – LLP” option is to be selected.
- RUN stands for Reserve Unique Name.
- In the dropdown list, the option “Conversion of Firm into LLP” is to be selected.
- Subsequently, there are two Proposed Names for the LLP to be given.
- Further, any supporting documents may be uploaded in PDF format, after which the “Submit” button is to be clicked on.
- The page is redirected to a payment gateway where the fees amounting to Rs. 200 are to be paid for the form.
- The reserved name then holds a validity period of 90 days.
(B). Digital Signature Certificates
- To proceed past the Name Incorporation stage, the Designated Partners of the LLP must possess their very own Digital Signature Certificates.
- Every e-form requires the DSCs of the Designated Partners to be affixed to the relevant forms to ensure a successful submission.
- Step II – Filing of the Forms with the RoC
- Form 17 (Application and Statement for conversion of a firm into LLP)
The application form has to be filled in with information such as: - Service Request Number (SRN) of the RUN – LLP form.
- Name of the Proposed LLP.
- Name, address, registration and partnership agreement details of the firm.
- Details regarding the number of partners, and capital contribution are to be provided.
- Secured creditor’s details.
We assist with filing the LLP agreement and other necessary documents with the Registrar of Companies.
The following attachments are to be provided:
- Statement of Consent of Partners of the firm.
- Statement of assets and liabilities of the firm certified by a Chartered Accountant in practice.
- Copy of the latest Income Tax Return acknowledgement.
- List of all the secured creditors along with their consent.
- Any other supporting information (optional).
Step 2 Form FiLLiP (Form for incorporation of LLP)
The application form is to be filled in with:
- Details of the RUN – LLP which will be auto-filed.
- Registered office addresses and email IDs of the LLP.
- Office of the Registrar.
- Nature of business activities.
- Details of the partners, designated partners, their DINs, DPINs and PANs.
- Amount of contribution by the partners in the LLP.
- Attachments to be provided are:
- Proof of address of the registered office of the LLP.
- Subscriber’s consent.
- NOC from the property’s owner and copy of utility bills (not more than 2 months old).
- Approval of any regulatory authority, where necessary.
- Details of any LLP/Company where a designated partner is also a director/partner.
- Proof of identity and address of the applicants.
- Where the name of the LLP is identical to any existing Company/LLP, a copy of the Board Resolution or Consent of the existing LLP serves as a No Objection Certificate.
- Both the forms are to be e-signed by the proposed designated partners and certified by a Cost Accountant, a Company Secretary, or a Chartered Accountant and any of whom must be in whole-time practice. The fee to be paid will vary concerning the amount of capital contribution.
Step III – Issue of Registration Certificate
The Certificate of Registration of the LLP shall be granted by the Registrar on approval of the application.
Step IV – LLP Agreement
- The LLP Agreement has to be submitted in Form LLP – 3 within 30 days of incorporation of the LLP. It shall contain the following particulars:
- Name of the LLP
- Name of the designated partners and other partners
- Form of capital contribution and profit sharing ratios
- Rules governing the LLP
- Rights and duties of the partners
Step V – Intimation to the Registrar of Firms
- The Registrar of Firms has to be given intimation regarding the conversion into an LLP and the related details of the LLP within 15 days from the date of the incorporation in Form – 14. The form has to be accompanied by:
- Copy of the LLP Incorporation Certificate.
- Copy of the incorporation documents submitted in Form FiLLiP. Once all these steps are complied with, it can be said that the conversion from a partnership to LLP is complete in all respects. Nevertheless, it is to be noted that the old licenses and permits do not transfer over to the LLP. They have to be freshly applied for post-conversion.
Registration
The Registrar, on receiving the relevant documents, may accept or refuse to register the LLP. If all documents are found correct per the provisions of the act, the Registrar shall issue a certificate of registration. The LLP will in less than 15 days of registration inform the Registrar of firms with which it is registered in Form 14. In the event of a refusal of registration by the Registrar, an appeal can be made with the tribunal.
We can conduct a thorough due diligence process to ensure that the partnership meets all the eligibility criteria for conversion into an LLP. We can review the partnership agreement, tax records, compliance records, and other documents to identify any potential legal or regulatory issues that may need to be resolved before the conversion.
Effect after Conversion
- Once the Partnership is converted into an LLP, the Partnership firm is deemed to be dissolved and the name of the partnership firm is removed from the register of Registrar of Firms.
- The assets, liabilities, rights, privileges, and obligations of the Partnership firm are considered to be wholly transferred to the LLP and the conversion doesn’t affect any existing contracts, employment, agreement, etc.
- The Partners will enjoy limited liability protection for all transactions conducted after the conversion of the partnership into an LLP. However, the Partners will continue to be personally liable for all business conducted as a Partnership before the conversion into LLP.
- In addition, after the conversion to LLP, the LLP for not less than 12 months from the date of conversion must include a statement that it was converted from a Partnership into an LLP in all official correspondence.
We can play a crucial role in converting a partnership into a Limited Liability Partnership (LLP) by providing guidance and assistance on the legal and regulatory requirements involved in the conversion process.
Documents for Conversion of Partnership to LLP
The following documents are required for the conversion of the partnership to LLP:
- Name of the Proposed LLP
- Information related to the Partnership Deed of the partnership firm
- Digital Signature Certificate of the Respective Partners
- Authorized Capital of the LLP
- Any information related to the contribution by the partners
- Registered office information of the partnership limited entity
- Identification Documents of the Partnership- Voter ID and other related information
- Utility Bill of the Partnership Firm- Electricity Bill/ Water Bill or any other Bill
- Evidence or Proof of the Registered Office of the Partnership (Lease deed/Ownership Documents) of the property
- Permanent Account Number (PAN) of all the Partners of the Partnership
- Audited Information Related to the Partnership
- Statements such as Bank Details of the Partnership
- Main objects of the Partnership Business
- NOC of the owner of the premises in case the premises are leased
- Post Incorporation Documents
- Copy of the Certificate of Incorporation of the LLP
- Documents which are submitted for FillIP
We can guide the newly formed LLP on compliance and governance issues, including registering for taxes and other statutory requirements, maintaining proper records, and adhering to the legal and regulatory framework.
