CONVERSION OF PRIVATE LIMITED COMPANY INTO LLP
LLP structure offers the benefits of both of partnership and a company. By converting the company to LLP, the business gains more operational flexibility. The characteristics of being a separate legal entity and limited liability remain the same. Further, the operations and management come directly in hands of the LLP partners unlike in Private Company where it is with the directors. many benefits conversion of private limited company into llp.
Procedure for Conversion of Private Limited Company into LLP:
Obtain Director Identification Number
Obtain DIN for those designated partners who don’t possess DIN already.
The board meeting will be required to be held to consider the proposal of conversion. The board resolution is to be passed for Conversion of Company into LLP and to approve any director to Apply for Name of LLP.
Application for Name Availability
The company will have to apply for reservation of name of LLP and get the name approval certificate from ROC.
File e-Form and then fill it with ROC along with the documents.
- Filing of Application for Conversion into LLP
Form 18 is the form for the conversion of a company into an LLP. But it needs to be filed with Form for incorporation itself.
Certificate of Incorporation as LLP from ROC
After complying to all the formalities by the company and approved by the Ministry, ROC issues a COI as to the conversion of LLP.
Filing of E-Form-3
e-Form-3 provide details about the LLP Agreement entered into between the partners. This form is to be filed in 30 days from the date of conversion of the company into an LLP.
- After receiving the incorporation certificate of LLP it has to be filed within 15 days of the date of conversion.
Benefits of Conversion of Private Limited Company into LLP
The partners of the LLP receives multiple returns, such as remuneration, the share of profit and also the interest on capital. The remuneration is paid for active participation by partners, whereas the share of profit is part of profit generated from business activities.
No partner is liable on account of the unauthorized actions of other partners. Thus, individual partners are shielded from the burden of joint liability created by another partner’s wrongful business decisions or misconduct.
No capital gains tax shall be charged on transfer of property from the firm to the LLP.
The partners are directly associated with the day-to-day operations and management of LLP. Unlike a company, LLP is governed through the LLP Agreement which is executed mutually by the partners.
How to Conversion of Partnership Firm Into Limited Liability Partnership
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Documents Required For Conversion of Private Limited Company into LLP
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 Pvt Ltd company be converted into LLP ?
Ans. A private limited company can be converted into an LLP under the following circumstances:
- The company has no security interest in its assets at the time of application.
- The partners of the LLP will be no one but the shareholders of the company.
2. How do I change my company to LLP ?
Ans. Requirements for conversion of company into LLP
- Obtain DPIN (Form DIR-3) …
- Meeting of board of directors of the Company. …
- File Form 1. …
- Draft the LLP agreement. …
- File Incorporation Documents in Form-2. …
- File Form-18 for Application for Conversion. …
- File Form-3. …
- Obtain certificate of incorporation.
3. 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.
4. 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.
5. Is audit compulsory for LLP ?
Ans. LLP Audit Requirement
LLPs are required to have its accounts audited by a practicing Chartered Accountant if its annual turnover, in any financial year exceeds Rs. 40 lakhs or its contribution exceeds Rs. 25 lakhs.
6. Is there any turnover limit for LLP?
Ans. Every LLP whose turnover exceeds INR 1 Cr. in case of a business or INR 50 Lakh in case of a profession, is required to get its books of accounts tax audited under section 44AB of the Income-tax Act. Such audit will have to be completed and filed by 30th September.
7. What are the limitations of LLP ?
Ans. Disadvantages of an LLP
- Public disclosure is the main disadvantage of an LLP. …
- Income is personal income and is taxed accordingly. …
- Profit can not be retained in the same way as a company limited by shares. …
- An LLP must have at least two members. …
- Residential addresses were historically recorded at Companies House.
8. Is LLP better than Pvt Ltd ?
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 an LLP are significantly lower than those for a private limited company.
9. What are the benefits of LLP ?
Ans. Disadvantages of an LLP
- The advantages of LLP (Limited Liability Partnership) are:
- No minimum capital requirement.
- No limit on owners of business.
- Lower Registration Cost.
- No requirement of compulsory Audit.
- Savings from lower compliance burden.
- Taxation Aspect on LLP.
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), .