Partnership Firm into Limited Liability Partnership

Need to convert from Partnership Firm into Limited Liability Partnership?

Partnership Firm into Limited Liability Partnership Conversion Starting at Just Rs.8,499/- (Inclusive of all Govt. Fees).

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Conversion of Partnership Firm to Limited Liability Partnership (LLP)

After presented of Limited Liability Partnership (LLP) Act in 2008 many Partnership Firms have started convert their Partnership Firm to Limited Liability Partnership (LLP). The reasons of conversion are self-evident, ability to take unlimited number of Partners, separate legal, entity Limited Liability, ease of ownership transfer etc. Because of advantages of Limited Liability Partnership (LLP) over Partnership Firm, LLP has become very popular amongst small and medium sized businesses.

The Partnership Firm which wants to convert itself to LLP must be registered under Indian Partnership Act, 1932. Unregistered Partnership Firm can’t be converted to LLP. LLP incorporated by conversion of Partnership Firm to LLP must have same partners as they were in the Partnership Firm. Therefore it is suggested that the Partnership Firm should retire all the Partners who do not wish to be a part of LLP and if new partners are to be added, they should be added after incorporation of LLP.

On Conversion, all the partners of the partnership firm might become partners of the LLP in the same proportion in which their capital accounts stood in the books of the Firm on the date of the conversion.

Advantage of Limited Liability Partnership

Low set-up cost

LLP has no authorized capital requirement (minimum of Rs. 1 lakh for a private limited company), significantly lowering the cost of setting up as compared to a Private Ltd Company

Limited Liability

Personal assets of partners are safe; a liability of LLP is limited to the assets of LLP

Minimal Compliances

Unlike in private Limited Company, no audit is required in LLP. An LLP’s accounts are required to be audited only if it has earnings greater than Rs. 40 lakhs or capital contribution of over Rs. 25 lakhs

Tax Advantages

LLP offers some important advantages over a private limited company. For example, Dividend Distribution Tax and tax surcharge are not applicable; hence fewer taxes have to be paid. Loans to partners are also not taxable

Separate Legal Entity

An LLP is a legal entity and a juristic person established under the Limited Liability Partnership Act 2008

Guide to Conversion of Partnership Firm into LLP

More and more partnership firms are being converted into a Limited Liability Partnership (LLP). LLP offers a host of features such as unlimited partners, limited liability protection, transferability, survivability, etc., – making it more attractive than a partnership firm. In this article, we look at the procedure for conversion of Partnership Firm into LLP in a step by step manner.

Digital Signature

Typically Partners in a Partnership Firm would not have a digital signature as the same is not necessary for registration of a partnership firm. However, if the Partners decide to convert the Partnership Firm into a Limited Liability Partnership, then Digital Signatures would be required for all the Partners.

DIN or DPIN

Partners in a LLP or Directors in a Private Limited Company require a DIN / DPIN. A DIN is a unique number given for each person who is a LLP Partner or Director. Once, a DIN or DPIN is issued, it can be used for lifetime without any renewal or compliance filing.

Name Approval

Once, two DIN or DPIN numbers are available, application for name reservation can be made to the Ministry of Corporate Affair. Reservation of name of the LLP must first be obtained before filing the forms for conversion of the Partnership Firm into LLP.

Filing LLP Form 17 – Conversion of Partnership into LLP

LLP Form 17 (Application and Statement for the Conversion of Partnership Firm into Limited Liability Partnership (LLP)) must be filed along with the incorporation application and subscribers sheet while converting a partnership firm into a LLP. Further, the following documents must be mandatorily attached to the LLP Form 17:

Statement of consent of partners of the firm;
Statement of assets and liabilities of the firm duly certified as true and correct by the Chartered Accountant in practice;
Copy of acknowledgement of latest income tax return (Mandatory);
Approval from any regulatory body/ authority (Mandatory, in case applicable approvals from the concerned body/ authority or authorities is required and have been obtained);
List of all the secured creditors along with their consent to the conversion (Mandatory in case consent of all the secured creditors for conversion of the firm into limited liability partnership has been);
Clearance or No Objection Certificate from Tax Authorities;

Once, LLP Form 17 is prepared it must be digitally signed by a Designated Partner and a Chartered Accountant (in whole-time practice) or Cost Accountant (in whole-time practice) or Company Secretary (in whole-time practice).

Filing for Incorporation & Conversion of Partnership into LLP

For the conversion of Partnership Firm into LLP, along with LLP Form 17, LLP Form 2 and LLP Form 3 must also be filed. LLP Form 2 contains incorporation document and subscriber’s statement. Along with LLP Form 2, the following documents must be submitted:

Proof of address of registered office of LLP;
Subscribers’ sheet including consent;
In principle approval of regulatory authority, if required
Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner (if any).

LLP Form 3 contains the initial LLP Agreement. This form can be filed once the Partnership Firm is converted into LLP or while filing for conversion of Partnership Firm into LLP. The LLP Agreement must be attached with LLP Form 3.

Successful Conversion of Partnership into LLP

On successful conversion of Partnership firm into LLP, the Registrar would issue Certificate of Incorporation of LLP. Once, the LLP is incorporated and the Partnership Firm is converted, the Partnership Firm would be deemed to be dissolved. Further, on conversion of Partnership into LLP, all properties, assets, interests, rights, privileges, liabilities, obligations of the firm is transferred to the LLP. In other words, the whole of the undertaking of the firm is transferred to the LLP.

Minimum requirements for Conversion of Partnership firm to LLP

Up to date filing of Income tax returns.
Consent of all the unsecured creditors for the proposed conversion in LLP.
The partners receive consideration only by way of allotment of shares in LLP.
Minimum 2 Partners.
At least 1 of the partners shall be an Indian Resident.
DIN (Director Identification Number) for all the Partners.
DSC (Digital Signature Certificate) for all of the Partners.
There is no concept of share capital, however there has to be some sort of contribution from each partner.

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