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LLP Conversion in Surat

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    LLP Conversion

    What is LLP Conversion?

    LLP conversion means converting an LLP into another business entity, say, a private limited company or a partnership firm into an LLP. This is usually done for business expansion, tax benefits, or compliance reasons. Details about the types, reasons, and process of LLP conversion are of utmost significance to entrepreneurs and businesspersons. 

    Forms of LLP Conversion

    LLP can be converted into three forms: 

    1. LLP to Private Limited Company

    2. Company into LLP

    3. Partnership Firm into LLP

    Every conversion possesses a distinct set of legal procedures and advantages based on compliance and business objectives. 

    LLP to Private Limited Company Why to Convert LLP into a Private Limited Company?

    Companies can choose to convert their LLP to a private limited company for the following reasons: 

    • Opportunity for Fund Raising: Private limited companies enjoy more opportunities for fund raising from investors, banks, and venture capitalists than LLPs.
    • Business Development: Business or business expansion into new markets is facilitated by a corporate organization.
    • TaxBenefits: In some circumstances, businesses have access to better tax benefits compared to LLPs.

    How to Convert LLP to a Private Limited Company?

    The process for voluntary strike off involves several steps:

    1. Approval of Name:

    1. The company should obtain the name’s approval from the Registrar of Companies (ROC) by submitting an online application. 
     
    2. The approved name is effective for 60 days. 

    2. Obtain DSC and DIN

    Directors must get a Director Identification Number (DIN) and Digital Signature Certificate (DSC) from the MCA portal. 

    3. Form No. URC-1 file:

    1. Submit Form URC-1 along with the following documents: 
     
    2. List of LLP members with their details. 
     
    3. The list of first directors with their DIN and address proofs. 
     
    4. Affidavit of compliance by directors with the law. 
     
    5. Copy of LLP agreement and certificate of registration. 
     
    6. No Objection Certificate (NOC) of lenders. 
     
    7. Current audited financial statements and recent newspaper ad. 

    4. File Memorandum and Articles of Association:

    Prepare and file the Memorandum of Association (MOA) and Articles of Association (AOA) to finalize the conversion. 

    5. Tax Consequences:

    For tax benefits, shareholding patterns should be maintained unchanged for five years from the date of conversion. 

    Alternative Conversion Process:

    An LLP can form a new private company and migrate all its business under a written agreement, without regulation but subject to capital gains tax and stamp duty. 

    Company into LLP Conversion

    Why Convert a Private Limited Company into an LLP? 

    Reduced Compliance Burden:

    LLPs bear a reduced compliance burden than companies.

    Limited Liability with Flexibility:

    Entrepreneurs enjoy limited liability but with less responsibility.

    Relief from Taxation:

    LLPs are relieved from dividend distribution tax (DDT) similar to companies.

    Straightforward Transfer of Assets:

    There is no stamp duty in transferring assets from an LLP to a company.

    More Members Allowed:

    LLPs allow a greater number of partners without legal restrictions.

    How to Convert a Private Limited Company to an LLP?

    If the director has already completed DIR-3 KYC, they can simply complete WEB-Based Director’s KYC by: 

    Board Resolution Approval

    Approve the conversion by passing a resolution. 

    Reservation of LLP Name:

    Request reservation of name through the RUN-LLP portal.

    Form FiLLiP: File FiLLiP (Form for Incorporation of LLP) along with the following documents:

    1. Partners' identification and address proofs.  2. Documents of registered office (utility bills, NOC, etc.).  3. Consent letters from designated partners. 

    File Form 18 for Conversion: Include the following documents: 

    1. Shareholders' approval.  2. Audited financial statements.  3. List of secured creditors with consent.  4. Approval by regulatory agency where necessary

    File Form 14:

    Notify the ROC within 15 days of the approval of the conversion.

    File LLP Agreement (Form 3):

    File the LLP agreement within 30 days to establish terms of operation among partners.

    Timely filing of DPT-3 ensures compliance, prevents legal risks, and maintains your company’s credibility with financial institutions and stakeholders. 

    Converting Partnership Firm to LLP

    Why Convert a Partnership Firm to an LLP?

    Separate Legal Identity:

    LLPs can hold property and enter into contracts in their own name.

    Continuity:

    The business is not affected by a change of partners.

    Limited Liability:

    Safeguards personal assets of partners.

    Brand Protection:

    LLP names are protected by law and unique.

    Transparency & Credibility:

    LLPs improve business credibility, making fundraising less difficult.

    How to Convert LLP to a Private Limited Company?

    The process for voluntary strike off involves several steps:

    1. Obtain DIN or DPIN:

    The partners in an LLP must apply for Director Identification Number (DIN) or Designated Partner Identification Number (DPIN).

    2. Name Approval:

    Approve LLP name via the MCA portal. 

    3. File Form FiLLiP:

    Attach supporting documents such as:

    1. LLP name and registered address. 
     
    2. Data of assigned partners. 
     
    3. DSC of partners. 
     
    4. PAN card and address proof of partners. 

    4. Form 3:

    Submit the LLP Agreement that determines: 

    1. Capital contributions. 
     
    2. Profit-sharing percentage. 
     
    3. Partner obligations and business operations. 

    5. File Form 17:

    File Form 17 with the ROC, with:

    1. Statement of partner consent. 
     
    2. Audited financial reports. 
     
    3. Latest income tax return. 
     
    4. Secured creditors’ agreement. 

    6. Approval & Incorporation:

    Upon approval by the ROC, the company is a legally recognized LLP.

    Amendments to LLP Agreement 

    An LLP Agreement will control business and partner obligations. Alterations need to be legally changed via a supporting deed. 

    How to Convert a Private Limited Company to an LLP? 

    Once the ROC receives the application, the following steps take place: 

    Board Resolution Approval

    Approve the conversion by passing a resolution.

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    Reservation of LLP Name:

    Request reservation of name through the RUN-LLP portal. 

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    Strike Off Approval:

    If no objections arise, the ROC approves the strike-off application. 

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    Procedure to Alter LLP Agreement:

    Once the ROC receives the application, the following steps take place: 

    1. Pass a Resolution:

    The partners must sanction the amendment.

    2. Sign and Notarize a Supplemental Deed:

    The deed should be signed and notarized.

    3. File Form 3:

    Within 30 days with: 1. Original LLP agreement.   2. Modified agreement. 

    4. File Form 4 (Where Partner Changes):

    Attach:  1. Consent letter.   2. Name/address change documentation.   3. Company resolution (as necessary). 

    Get answers to all your queries 

    1. Must LLPs finance comparable companies?

    LLPs have fewer sources of funding. There are additional sources of funding as a company.

    2. How long is the process of conversion of LLP?

    It usually takes 4-8 weeks, depending on approvals and documentation.

    3. Is LLP conversion taxable? 

    Tax breaks are subject to shareholding retention and capital gain compliance.

    4. Require all the partners to consent to conversion to LLP?

    Yes, there is complete agreement. 

    5. Can LLPs be converted back to partnership firms?  

    No, the LLP cannot be converted back into a partnership firm.