Section 18 of the Companies Act, 2013 confers right to the companies for the conversion of comp...
Limited Liability Partnership or LLP has expanded as one of the popular business structures in India. The second schedule of the Limited Liability Partnership (LLP) Act deals with the conversion of Partnership Firm to LLP. The Limited Liability Partnership or LLP is generally preferred over the regular partnership business as it is more beneficial for the partners involved. LLP is a separate legal entity with a mandatory registration procedure with the Central Government, which is not the case with a partnership firm. Secure registration procedures, ease of maintenance and minimal compliance requirements make it an ideal business structure for several small and medium-sized businesses. Hence conversion of a Partnership Firm to Limited Liability Partnership is a good decision to protect the partner’s rights and also to limit their liabilities. Entrepreneurs in the present time are going for the conversion of a partnership firm to LLP to avoid the risk partnership brings along.
The basic eligibility criteria for conversion of Partnership Firm to LLP are mentioned below:
There are six basic steps for the conversion of Partnership Firm to LLP or Limited Liability Partnerships.
Generally, the partners in a partnership firm do not have a Digital Signature as the same is not necessary for the registration of a partnership firm. However, if the partners of a partnership firm decide to convert it into a Limited Liability Partnership or LLP, then Digital Signatures would be required for all the partners.
DIN or Director Identification Number/DPIN is a unique number issued by the Central Government. Any person who wishes to be appointed as a designated partner in an LLP needs a DPIN or Designated Partner Identification Number. This number is issued to any person only once, which can be used throughout his life without any compliance.
After the DIN process is over, a person can apply for the reservation of the name of the proposed LLP through MCA or the Ministry of Corporate Affairs. Before filing forms for the conversion of Partnership Firm to LLP approval must be obtained with regard to the name of the LLP.
Application and statement for the conversion of Partnership firm to LLP are filed in LLP Form 17. The application is filed along with the incorporation application and subscribers sheet during the conversion of the Partnership firm to LLP. The following documents need to be attached in Form -17:
Form 3 consists of all the information regarding the LLP agreement. LLP Agreement must be attached as a document in this form.
Form Fillip to be signed for Incorporation of the Limited Liability Partnership Firm. The following documents and information are required for filing of form fillip:
Attachments to be made in Form Fillip:
The following documents are required for conversion of Partnership firm to Limited Liability Partnership:
On successful conversion of Partnership firm to LLP, the Registrar shall register the documents and issue a certificate of registration stating that LLP is on from the date specified in the certificate. The LLP shall inform the concerned Registrar of Firms regarding the conversion and particulars of the LLP within 15 days from the date of registration. All the properties, interests, assets, rights, privileges, etc. of the partnership firm will be transferred to the LLP. The Partnership firm shall be deemed to be dissolved if registered under the Indian Partnership Act, 1932, and also to be removed from the records maintained under that Act.
On conversion, the partners of the LLP shall be bound by the provisions of the second schedule of the LLP Act. LLP provides a better business structure than a regular partnership firm. Further, there are more tax benefits, below a certain capital no audit is required, no limit with regard to a number of partners or capital requirements. However, any approvals, license or permit is not automatically transferred to LLP, fresh registration and license are needed. The process of conversion of a Partnership Firm to LLP is a lengthy procedure, and it is advisable to take professionals to help in order to make sure that all formalities are dealt with, and all procedures are completed.