Limited Liability Partnership is a form of business that is a good option for the small and medium type of organization. The cost of LLP registration and its compliances are less than the company. It gives benefits to small business because it has the quality of both the partnership firm and the Private Limited company. LLP has its own identity which is different from its partners, the LLP can own the property in its name as well as it can apply for a trademark on its name. In the LLP the liability of the partners is limited just like shareholders have in the private limited company. LLP is always a better option for small entrepreneurs if they are planning to start their business as a partnership firm because it is a partnership firm that gives the benefits of the firm as well as the company.
LLP is governed by the MCA through ROC therefore, it is more reliable than a partnership firm. In the current situation, LLP is best for the startups and many people are converting their business from an old partnership to LLP.
The procedure of conversion is very simple as if anyone wants to convert its company to LLP, then firstly it must have Private Limited or Public Limited company and all the mandatory compliances must be done.
Requirements Before Conversion Of LLP
- Every member must give their consent for the conversion
- All the creditors also agree with the conversion of the company into LLP
- No prosecution shall be initiated or pending against the company under the Companies Act
- No unsatisfied or open charge should be pending
- No litigation should be pending against the company in any court or tribunal
- No Section-8/section-25 company registered under the Indian Companies Act, 2013/1956 can convert itself into LLP
- The Company must be a company having share capital not guarantee.
- At least one-year compliances should be filed after its incorporation, means financial statement and annual report must be filed to the ROC
- The latest copy of the Income-tax return should be filed to the ROC.
- After conversion, all members of the company should become partners in the LLP.
Documents Required For Conversion Of LLP
- Consent letter from the members of the company
- Financial statement of the company like balance sheet, profit & loss a/c statement
- Consent from all the creditors of the company along with their list
- Board Resolution and Special Resolution passed in the meeting of directors and members
- The explanatory statement for the conversion from company to LLP
- Latest utility bill for the office address proof
- Identity and address proof and PAN card of designated partners and partners.
Process Of Conversion From Company To LLP
Step 1 - Hold Board Meeting
Conduct board meeting of the directors of the company and pass board resolution for conversion of company into LLP and for calling the general meeting and authorize a person for taking all necessary steps for such resolution.
Step 2 - Name Reservation
Name reservation is very necessary because in the company there is “Pvt Ltd” or “Ltd” is mentioned and in LLP the name should be ended with “LLP”, therefore, a fresh name application should be filed and approval from CRC is required.
Step 3 - Director Identification Number
All the members who are going to become designated partners shall have DIN, therefore, if the members who are not a director in the company should apply for the DIN separately before filing conversion application.
Step 4 - General Meeting Of The Company
Once the name is approved by the government, a general meeting shall be conducted and a special resolution shall be passed for the conversion of the company. Also required a consent letter from all the creditors of the company.
Step 5 - Submission of Incorporation form
After all the above steps an incorporation application shall be filed to the ROC in FiLLiP form along with the fees and required documents. A list of documents are given below:
- Address proof of the registered office address of the LLP
- Id proof (voter id/passport/driving license)
- Address proof (bank statement/ mobile bill/ telephone bill/ electricity bill) of all the designated partners or partners. The address proof shall not be older than 2 months.
- Consent letter from the designated partner that they agree to act as a partner of the LLP
- A signed copy of Subscriber Sheet
Step 6 - Conversion Application Filing
For conversion from company to LLP, FORM 18 shall be filed along with the requisite documents and fees. This form shall be filed along with the incorporation form. Following are the documents that are needed to be attached with the form:
- Consent of the shareholder of the company for the conversion
- Statement of profit & loss a/c and other financials duly certified by the auditor
- Latest income tax return
- List of creditors of the company along with their consent letter
- Approval letter from any regulatory body/ authority, if required
- Statement of declaration that no litigation or case is pending against the company in any court or tribunal.
Step 7 - Certificate of Incorporation
After complying with all the condition and following the procedure of conversion a certificate of incorporation is issued by the ROC.
Step 8 - LLP Agreement
After incorporation of LLP , an agreement has to be drafted between the partners of the LLP and the same have to be notarized on stamp paper and the same has to be submitted to the ROC within 30 days from the date of incorporation.
The stamp duty of LLP is according to the capital and the state where the registered office of the LLP is situated.
Step 9 - Form-14
After receiving the certificate of incorporation for the conversion from the company to LLP a FORM-14 needs to be submitted to the ROC within 15 days from the date of incorporation. The form shall be submitted with the following documents along with the fees:
- Certificate of Incorporation
- All the documents are submitted to the ROC at the time of incorporation.
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