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Conversion of Partnership Firm Into LLP

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Conversion of Partnership firm to LLP – Overview

 

  • Several partnership firms began converting to LLPs after the LLP Act was introduced in 2008. The benefits of conversion are obvious, including the possibility to accept an infinite number of partners, the creation of a new legal body, limited liability, and simplicity in the transfer of ownership. These benefits of LLP over partnerships have led to LLP’s rising popularity among small and medium-sized firms.

    The Indian Partnership Act, 1932 requires the Partnership Firm that wants to become an LLP to register. Unregistered Partnership Firm can’t be transformed to LLP. The partners in an LLP that was formed by converting a partnership firm into an LLP must be the same. As a result, it is recommended that the Partnership Firm retire all of the Partners who do not wish to be a part of LLP, and that new partners be joined after LLP has been incorporated.

Benefits of a Limited Liability Partnership

There are numerous benefits to LLP which will give clarity on why conversion of partnership firm into LLP benefits the individual:

Separate Legal Entity:
  • An LLP is a separate legal entity from its partners. Each partner can sue the other in case a situation arises.
  • It has an uninterrupted existence that follows perpetual succession, i.e, the partners might leave, but the business will remain. A term of dissolution has to be mutually agreed upon by the firm, to dissolve.
Flexible Agreement:

Transferring the ownership of LLP is simple. A person can be quickly inducted in as a designated partner, and the ownership will switch to them.

Suitable For Small Business:
  • LLPs with a capital of less than 25 lakhs and turnover less than 40 lakhs per year, do not require any formal audits. It makes registering as LLP beneficial for small businesses and startups.
  • An LLP can own or acquire property because it is recognized as a juristic person. Partners of an LLP cannot claim the property as theirs.
No Owner /Manager Distinction:

An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, venture capitalists do not invest in the LLP structure.

Procedure for Conversion of Firm into LLP

Here is the process to register LLP in India. KhataDekho provides a seamless and hassle-free process and one can check here to know the quick and detailed process to register an LLP.

Step 1: Obtain Digital Signature Certificate (DSC)

Step 2: Apply for Director Identification Number (DIN)

Step 3: Name Approval

Step 4: Incorporation of LLP

Step 5: File Limited Liability Partnership (LLP) Agreement

 

Documents Required for Conversion of Partnership Firm Into LLP

When one plan to convert partnership to LLP, there are a few documents one must carry, here is the list:

To Be Submitted By Partners

  • Scanned copy of PAN Card or passport (Foreign Nationals & NRIs)
  • Scanned copy of Aadhar Card/ Voter’s ID/Passport/Driver’s License
  • Scanned copy of latest bank statement/telephone/mobile bill or electricity/gas bill
  • Scanned passport-sized photograph Specimen signature (blank document with signature [partners only])
  • Note: Any one of the partners must self-attest the first three documents. In the case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).

For Registered Office

  • Scanned copy of the latest bank statement/telephone/mobile bill, or electricity or gas Bill
  • Scanned copy of the notarised rental agreement in English
  • Scanned copy of No-objection certificate from the property owner
  • Scanned copy of sale deed/property deed in English (in case of owned property)

Conditions For Conversion of Partnership Firm into LLP

  • According to Section 55 of the Limited Liability Partnership Act of 2008 read with Schedule II of the Act, a partnership can partnership be converted into llp.
  • There cannot be any new partners or for existing partners to stop being partners during the application process since all partners of the firm must be partners of the LLP.
  • Before submitting such an application, at least two partners must have DPINs and all Partners must possess a current Digital Signature Certificate (DSC).
  • The Partnership Act of 1932 requires that the partnership entity being converted be registered.
  • The approval of all partners is required.
  • The partners of the LLP must be the same as those of the partnership firm.
  • After the conversion is finished, any partner who wants to leave the LLP can do so.
  • All Designated Partners must receive a Director Identification Number (DIN) or Designated Partner Identification Number (DPIN).

Timeline

Free Consultation and Documentation
  • Our Expert team resolve your queries. Our consultation is completely free.
Action Required by you
  • You Need to fill up the draft, Make Payment and Submit Documents to Khata Dekho
Action By Khata Dekho
  • Once the Documents are uploaded we’ll start the step -by-step process of Incorporation

Frequently Asked Questions (FAQs)

  • Get digital signatures of all partners
  • Apply for DIN for all the partners
  • Submit the application with RUN-LLP Form on the MCA website
  • Submit an application by filling out the form Fillip for the conversion
  • Register LLP agreement with the MCA website
  • Obtain a Certificate of Incorporation for your LLP.
No! registered and unregistered Partnership Firms can be converted into LLP.
The statement of Account and Solvency from the foreign LLP should be submitted on Form 8. After the first six months of the fiscal year have ended, it must be completed within 30 days. The amount due is ₹ 1000.
The Registry of Companies (RoC) must receive a Yearly Return and Statement of Earnings from an LLC each year.
A partner is a member of an LLP, while a designated partner is responsible for compliance with the LLP Act and has additional legal obligations, such as maintaining books of accounts and filing documents with the RoC.
The main advantage of converting a partnership firm to LLP is that the partners’ liability becomes limited, which means that they are not personally liable for the debts and obligations of the LLP beyond the amount they have contributed to the LLP’s capital.
The result of converting a partnership company into an LLP is the dissolution of the partnership and the transfer of the partnership’s assets and obligations to the LLP. The LLP’s appointed members are the partnership’s partners.
One of the most important prerequisites for converting a partnership to an LLP is obtaining the consent of all partners.
The creation of an LLP document outlining the terms and conditions of the partnership is one of the key prerequisites for converting a partnership to an LLP.

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