Conversion of Partnership Firm Into Limited Liability Partnership
Limited Liability Partnership Registration is a hybrid of existing partnership firms and full-fledged companies. It is a separate legal entity, liable to the full extent of its assets with the liability of the partners being limited to their agreed contribution in the firm. LLP is a separate legal entity with compulsory registration with the central government, which is not the case with the partnership. Therefore conversion of partnership firm into limited liability partnership is a good business decision to secure the partners’ rights and limit their liabilities.
Process of Conversion of Partnership Firm Into Limited Liability Partnership :
STEP I: Apply for DIN :
First requirement on Conversion of Partnership Firm into LLP is to Obtain DIN for the Partners of Company.
- If there are only Two Designated Partners, DIN can be obtained along with Incorporation Form (FiLLiP).
- If there are more than Two Designated Partners, in such case need to obtain DIN for other Designated Partners.
STEP II: Apply for Name Approval :
For Limited Liability Partnership registration, 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 as may be prescribed. On submission of RUN web form MCA personnel should check that the name is unique and not similar to other existing companies and trademark. After that, if the name is unique and not similar than MCA personnel reserve the name for the LLP and intimate through e-mail. After the reservation of name, we should registered the LLP within 90 days from the date of approval.
STEP III: APPLY FOR DSC (Digital Signature Certificate) :
Getting DSC for Designated Partners for digital authentication of the Incorporation documents. You can use only the valid Digital Signatures issued to you. It is illegal to use Digital Signatures of anybody other than the one to whom it is issued.
STEP IV: Filling of form with ROC :
Following below mention forms along with attachments are required to file with ROC for Conversion of Partnership firm into LLP.
Application for conversion in Form 17 is required to be filed by the partners along with the following attachments:
- Statement of Consent of all Partners
- List of all unsecured creditors along with their consent to conversion
- Statement of assets & liabilities of the company duly certified by a CA.
- Approval from any other body/authority as may be required
- Declaration for Part B of Form 17 by Designated Partners
- Copy of acknowledgement of latest Income Tax Return
Application for in Form 17 is required to be filed by the partners along with the following attachments:
- Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts);
- NOC from the owner of the property.
- Copy of the utility bills (not older than two months)
- Subscriber Sheet including Consent.
- In case of Designated Partner does not have a DIN, it is mandatory to attach proof of identity and residential address of the subscribers
- All the Designated Partners should have Digital Signature.
- Detail of LLP(s) and/ or company(s) in which partner/designated partner is a director/ partner
- Copy of approval in case the proposed name contains any word(s) or expression(s) which requires approval from central government;
- Form-9 – Consent to Act as Designated Partners
STEP V: Issue of Certificate of Registration of LLP :
Section 58(1) of the LLP Act provides that the Registrar, on satisfying that a firm has complied with the provision of the Second Schedule shall subject to the provisions of the LLP Act and the rules made there under, register the documents submitted under such schedule and issue a certificate of registration.
Sub-rule (1) of rule 32 of the LLP Rules provides that the Registrar shall on Conversion of Partnership Firm into LLP, issue a certificate of registration under his seal in Form- 19.
STEP VI: Draft LLP Agreement :
Contents of Agreement Are :
- Name of LLP
- Name of Partners & Designated Partners
- Form of contribution
- Profit Sharing ratio
- Rights & Duties of Partners
- Proposed Business
- Rules for governing the LLP
It is not necessary to have the LLP Agreement signed at the time of incorporation, as the details of the same needs to field in e-form 3 within 30 days of incorporation but in order to avoid any dispute between the partners as to the terms & conditions of the agreement after the conversion into LLP.
STEP VII: Filling of e-form-3 :
This form provides information in respect to the LLP Agreement entered into between the partners. ATTACHMENT: LLP Agreement
STEP VIII: Intimate the Registrar of Firms
As per the Second Schedule, the LLP shall, within 15 (fifteen) days of the date of registration, inform the Concerned Registrar of Firms with which it was registered under the provisions of the Indian Partnership Act, 1932, about the Conversion of Partnership Firm into LLP and of the particulars of the LLP in Form – 14 along with following attachments:
∇ Copy of Certificate of Incorporation of LLP.
∇ Copy of Incorporation documents submitted in FiLLiP.
Effect of Conversion of Partnership Firm Into Limited Liability Partnership
♦ Once all the above steps have been complied with, the Partnership Firm shall be converted into Limited Liability Partnership (LLP) and shall follow rules & regulations as applicable to LLPs.
♦ Section 58(2) of the LLP Act provides that upon such conversion, the partners of the firm, the LLP to which such firm has converted, and the partners of the LLP shall be bound by the provisions of the Second Schedule of the LLP Act.
Benefits of Conversion of Partnership Firm Into Limited Liability Partnership
All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the LLP.
All movable and immovable properties of the firm automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
No capital gains tax shall be charged on transfer of property from the firm to the LLP.
The goodwill of the firm and its brand value is kept intact and continues to enjoy the previous success story with legal recognition.
The accumulated loss and unabsorbed depreciation of firm is deemed to be loss/depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.
The partnership is not a separate legal entity. In case if the partner(s) dies or retires or in any other case has to leave the firm, the partnership ceases to exist. In this case, a new partnership has to be formed; but this is not the case with a limited liability partnership. Limited liability partnership is a separate legal entity.
How to Conversion of Partnership Firm Into Limited Liability Partnership
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Documents Required For Conversion of Partnership Firm into limited liability partnership
- 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
- NOC from ownerNo Objection Certificate to be obtained from the owner of registered office
- Rent AgreementRent Agreement of the registered office should be provided, if any
- ROFCertificate In case the partnership firm is registered, RoF certificate is compulsory.
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 Partnership Firm into Limited Liability Partnership
1.Can a LLP be converted into partnership firm?
Ans. No, An existing LLP cannot be converted in a Partnership Firm. There is no provision for such conversion in Limited Liability Partnership Rules, 2009. It is introduced by rectifying the conventional bottlenecks in the Partnership form of business structure.
2.2. What should be the date of LLP agreement ?
Ans. Date of the agreement and parties of agreement. After incorporation, the LLP agreement is to be executed within 30 days as per the LLP Act. LLP agreement is between partners of LLP which can either be LLP or individual partner.
3. 3. What is Form 3 LLP ?
Ans. After Limited Liability Partnership firm need to prepare LLP Agreement. LLP Agreement have major details of LLP. Such as Profit sharing ration, Capital Contribution , roles & responsibility of partners etc. … With in 30 days of LLP Registration File form.
4. How do you calculate capital gains on a company to LLP?
Ans. Computation of ‘capital gains‘ The conversion of the assets and liabilities of the erstwhile company to the LLP took place at the ‘book value’ itself and therefore, no separate cost other than the ‘book value’ was attributable to the individual assets and liabilities.
5. Is Schedule III applicable to LLP ?
Ans. Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act.
6. How do you convert Pvt Ltd to proprietorship ?
Ans. It’s not possible to convert a private limited company into a sole proprietorship as it is not governed by any law. But vise-versa is possible i.e. conversion of sole proprietorship into private limited company.
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), .