Conversion of Limited Liability Partnership into Private Limited Company
There are many businesses that started as LLP (Limited Liability Partnership) but now wish to Conversion of Limited Liability Partnership into Private Limited Company to taste the more growth in the business or for infusing equity capital. The LLP businesses have the rights to convert into the company.
Procedure of Conversion:
For Conversion of Limited Liability Partnership into Private Limited Company there are many requirements which need to be fulfilled. The LLP must have minimum 2 partners, a NOC from the Registrar of Companies where the LLP is registered, an advertisement for conversion needs to be sent in one national and local newspaper are some of the basic requirements which are to be satisfied by the LLP and thereafter the following process is to be followed for converting it into a Private Limited Company:
- Approval of name
- Securing DSC and DIN
- Filing form no. URC – 1
- Memorandum of Association & Articles of Association
A. Approval of Name
For name approval, firstly we should check the availability of name on the MCA portal after that we should apply for name through RUN web form on the MCA portal along with fees as may be prescribed. Various items are to be filled in while submitting the RUN form. After the reservation of name, we should incorporate the company within 20 days from the date of approval.
Securing DSC and DIN
Apply for the Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all the members of the LLP who after the conversion will be the directors of the Private Limited Company, in case if they don’t have it.
A self- attested address proof, identity proof and one recent passport size colour photo of the applicant have to be provided along with the application. DIN can be obtained directly through filing incorporation form.
B. Filing Form No. URC-1
After completing the the above mentioned steps, the applicant must now file the form no. URC-1 along with the documents.
After getting the approval of the Name, the applicant must file the form along with the documents which are needed with the ROC (Registrar of Companies) within the 20 days of the date of approval of the name.
Given below is the list of documents which are mandatory for filing with the ROC for the Conversion of Limited Liability Partnership into Private Limited Company.
- E-form URC-1
The e-form URC-1 must be filed by the company along with the documents that are mentioned below-
- A list that shows the names, addresses, and occupations of the partners of the company along with shares details that they hold.
- A list which shows the names of the persons who are the company’s first directors.
- An affidavit must be taken from each and every person who is appointed as the first directors of the company in which it must be written that he is ‘not disqualified to be a director’ as per the sub-section (1) of Section 164 and also that the documents that has been attested with the Registrar for registration of the company has the correct, complete and true information as per the knowledge and belief.
- A list that contains the names and addresses of the LLP (Limited Liability Partnership) partners.
- A copy of the agreement of the LLP.
- The assets and liabilities statement of the LLP (Limited Liability Partnership) duly given by the practice chartered accountant which must be done not before the 30 days mentioned after the filing of the form no. URC-1.
- A copy of the recent ITC (Income Tax Return) of the LLP (Limited Liability Partnership).
- An agreement that the appointed directors of the company must follow the requirements of the Indian Stamp Act, 1899 (2 of ‘1899).
- The agreement or NOC (No Objection Certificate) must be in written from all the applicant’s secured creditors.
- Majority of the Partners must give an agreement in written.
- A statement containing the given below particulars-
- The company’s nominal share capital and in how many shares it is divided;
- How many shares are taken and how much amount is paid on each of the share;
- Company’s name along with the ‘Limited’ or ‘Private LImited’ words added after the name as per the requirement of the directors.
- E-form SPICe Form
The company must mandatorily file the SPICe Form forms with the linked forms such as URC-1 and also along with all the documents which are required in the normal Incorporation of the Company.
Benefits of Conversion :
Raising funds as a private limited company is a comparatively easy task as it gives an opportunity for raising shares and has many ways to raise funds in the form of private equity and Banks and Financial Institutions.
The obligation or debts of the company does not create a charge over the owner’s personal assets. Their liability is limited only to the subscribed capital unpaid by them.
A Private Limited Company is registered, a legal entity is born in eyes of law, which is separate from its owners and managers. The company can operate in its own name from opening a bank account to own assets and enter into a contract with parties. This also provides the capacity to sue third parties.
How to Conversion of Limited Liability Partnership into Private Limited Company :
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Documents Required For Conversion Of Limited Liability Partnership Into Private Limited Company
- PAN CardPAN Card of Partners.
- Identity ProofAadhar card and Voter ID/ Passport/ Driving License of Partners.
- Address ProofLatest Telephone Bill /Electricity Bill/ Bank Account Statement of Partners.
- PhotographLatest Passport size photograph of Partners.
- Business Address ProofLatest Electricity Bill/ Telephone Bill of the registered office address
- Financial StatementsDuly certified copy of latest audited Finacial Statements
- Incorporation documents of the LLPCertificate of Incorporation to be provided
- Copy of ITRA copy of the latest income tax return filed by the Limited Liability Partnership.
Following registered persons not required to file GSTR 1, 2 and 3 such as:
Goods and Services Tax (GST) is an indirect tax applicable on the supply of goods and services. It is a comprehensive, multistage, destination based tax. It has subsumed almost all the indirect taxes except a few state taxes. It is collected from point of consumption and not point of origin like previous taxes.
Documents attach in trademark application:-
A trademark can be registered by the Controller General of Patents Designs and Trademarks, Ministry of Commerce and Industry, Government of India under Trademark Act, 1999 to protect the identity of any goods and services.
Some basic information about Income tax
An income tax is a tax imposed on individuals or entities commonly known as taxpayers that varies with respective income or profits. Income tax generally is computed on taxable income which is calculated after various deductions. Taxation rates may vary by type or characteristics of the taxpayer.
Frequently asked questions on Conversion of Limited Liability Partnership into Private Limited Company
1.Can LLP be converted into private company?
Ans. An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules, 2014 .
2.Which is better LLP or Pvt Ltd company?
Ans. LLPs combine the operational advantages of a Company as well as the flexibility of Partnership Firms. The fee for incorporation of an LLP firm is very nominal as compared to that for Private Limited Company. The compliance requirements for anLLP are significantly lower than those for a private limited company.
3. Can LLP get funding?
Ans. Yes, a limited liability partnership can raise funds other than its partners. … In other words, a limited liability partnership cannot raise equity funding in LLP from any person other than its partner.
4. Does LLP need to file tax return?
Ans. LLPs must file income tax return in form ITR-5. The due date for filing income tax return for a LLP would change based on the amount of turnover the LLP recorded in the previous year and the amount of capital contribution. LLPs with an annual turnover of less than Rs.
5. Can LLP raise funds from public?
Ans. LLP stands for Limited liability partnership which refers to a company form of business where the only the partners contribute in the capital and their liability remains limited to the extent of their capital contribution in the business. Therefore, LLP cannot raise funds from public in any form.
6. Why is LLP better than company?
Ans. It offers limited liability, offers tax advantages, can accommodate an unlimited number of partners, and is credible in that it is registered with the Ministry of Corporate Affairs (MCA). At the same time, it has fewer compliances than a private limited company and is also significantly cheaper to start and maintain.
7. Is GST applicable to LLP?
Ans. The Central Government recently notified that the Limited Liability Partnerships (LLP) registered under the 2008 Act must be considered as a partnership firm or Firm under the Goods and Services Tax (GST) regime. … In an LLP, each partner is not responsible or liable for another partner’s misconduct or negligence.
Basic Features to Read before starting private limited company
Private company is required to add the word “Private limited” or “Pvt. Ltd.” to end of its name. Private company should have at least two member and two directors. Private company have right to issue debentures to any number of persons.
Features of Public Limited Company
MCA provides the facility for incorporation of public limited company. For incorporation, firstly apply for name through RUN (Reserve Unique Name) on MCA portal. After availability of name from ROC we should file incorporation form i.e. Spice 32, INC 33(for eMOA), INC 34(for eAOA), .