Conversion Process of Pvt Ltd Company into LLP

In the entrepreneurship domain, over the past decade, LLPs have emerged as the most desired forms of business ventures. Business entities need to understand the relevance of evolution in their operations. If the Pvt. Ltd Company structure is not functioning for a business, its management must realize when is the time for a change. This article discusses the notion of converting a Pvt Ltd Company into an LLP.

Limited Liability Partnerships (LLP)

An LLP is a perfect mixture of a Pvt. Ltd Company and a Partnership firm. It is ideal for small and medium-sized businesses. As a result of its numerous advantages, Limited Liability Partnerships (LLP) are gradually becoming a popular type of entity.

It is an alternative corporate business structure that combines the benefits of a company's limited liability with the freedom of partnerships. LLPs in India get controlled as per the Limited Liability Partnership Act of 2008, which went into effect on April 1, 2008. This Act was introduced to promote Micro, Small, and Medium Enterprises. When opposed to other forms of business companies, LLP registration offers the benefit of self-governance and reduced compliance.

What is the purpose of converting Pvt Ltd Company to a limited liability Partnership?

• In comparison to a business, an LLP now has greater flexibility.
• An LLP will have fewer compliance obligations than a corporation.
• If the LLP's annual turnover is less than Rs. 40 lakhs and its capital investment are less than Rs. 25 lakhs, it is not required to have its accounts audited.

Eligibility of conversion

A Pvt Ltd Company can be transformed into an LLP in the following situations:

• There are no existing or active security interests in the assets of a company at the time of application.
• The LLP's partners will be none other than the company's stockholders.

Pre-requisites for Converting a Pvt Ltd Company to an LLP

• Every firm member must approve the conversion decision.
• In an LLP, all members become partners, and no one else.
• The conversion must be approved by all of the company's creditors, not just its members.
• Under the Companies Act, no prosecution should have been launched and no procedure should have been pursued.
• All outstanding forms and returns must be completed by the RoC.
• The company should have no outstanding (unsatisfied) charges.
• After incorporation, the firm should have submitted at least one balance statement and annual return.
• The firm should have a share capital.
• The firm should not be classified as a ‘Section 25 company' or a ‘Section 8 company under the Companies Act, 1956/2013.

Procedure for Converting a Pvt Ltd Company to an LLP

1. Get the Director Identification Number (DIN)

Obtain DIN for those specified partners who do not already have DIN. The minimum number of authorized partners required to form an LLP is two. One amongst them must be a resident Indian. DIN is presently only assigned at the time of incorporation or when a person is appointed as a director or designated partner in a business or an LLP.

As a result, to get DIN, such individuals must first be appointed as directors in the business. Those who want to become designated partners will need to have a DIN. Furthermore, it is necessary to apply for a DSC before applying for a DIN. A Body Corporate could also be a participant in a Limited Liability Partnership through a nominee.

2. Meeting of the company's Board of Directors

• Call a Board of Directors meeting.
• Pass the necessary resolutions for the conversion of the company into an LLP.
• Pass the appropriate resolution authorizing any director to file the relevant paperwork with MCA.
• A resolution is required to empower any director to file the relevant forms with MCA.

3. Name Availability Application

The organization must apply to reserve the LLP's name and get a NAME APPROVAL CERTIFICATE FROM ROC.

4. Filing of the Incorporation Form along with the Documents Required

Fill out E Form FiLLiP and submit it to ROC with the accompanying attachments:

• Address evidence for the LLP's registered office.
• The subscription forms.
• Consent to serve as a designated partner and partner
• Identity and residency credentials of selected partners and partners
• Details about the LLP(s) and/or company(s) in which the partner/designated partner is a director/designated partner.

5. Filing of the Application for Conversion into an LLP

Form 18 is the form used to convert a corporation into an LLP. However, it must be filed along with the Form for Incorporation.

Fill out E-FORM-18 and submit it to ROC along with the accompanying ATTACHMENTS:

• Statement of shareholder approval (Mandatory)
• The company's financial statements have been verified as accurate and correct by an independent auditor.
• A list of all secured creditors, along with their permission, is provided.
• Copy of latest income tax return acknowledgment (Mandatory)

6. ROC's Certificate of Incorporation as an LLP

Following completion of all requirements by the company and approval by the Ministry, the ROC will issue a COI for the conversion of an LLP.

7. Forming a Limited Liability Partnership Agreement

The following are the contents of the agreement:

• The name of the LLP
• Names of Partners and Designated Partners
• Contribution Type
• Profit Distribution Ratio
• Partners' Rights and Duties
• Proposed Enterprise
• Rules to govern a Limited Liability Partnership (LLP)

8. E-Form-3 filing

This form contains information regarding the LLP Agreement that the partners have agreed to. This form must be submitted within 30 days of the firm being converted into an LLP.

LLP Agreement must be included.

9. E-Form -14 filing (Intimation to ROC)

It must be filed within 15 days of the date of conversion after receiving the LLP's incorporation certificate.

E-FORM 14 ATTACHMENTS:

• Copy of the LLP's Certificate of Incorporation (COI).
• Copy of incorporation paperwork filed to ROC in E-Form FiLLiP.

Impact of conversion from a Pvt ltd Company to an LLP

The following are some of the consequences of converting a corporation into an LLP:

• After conversion, the private corporation is dissolved.
• The name of the private limited firm will be removed from the ROC registry.
• Existing responsibilities, commitments, agreements, contracts, and employment will be unaffected by the conversion.

The company must notify the relevant authorities of the conversion and make the required modifications to all registrations and licenses.

Benefits of conversion from a Pvt ltd Company to an LLP

• There is no restriction on the number of partners, which is not the case with private limited corporations.
• When a private limited company is converted to an LLP, all of the company's assets and liabilities are transferred to the LLP. There is, however, no need for a means of transmission. As a result, such transactions will not be subject to stamp duty.
• There is no legal requirement to have a certain number of meetings or keep statutory records.

Conclusion

Because of the flexibility in its form, compliances, taxation, and operation, LLP would be beneficial to small and medium-sized businesses in general. LLPs are the preferred company structure across the world, particularly in the service industry or for operations involving experts. The present company structure can be converted to an LLP while preserving the benefits of limited liability. Therefore, GoTaxfile assists you with the same. It makes the process quite easy for you without you worrying about anything.

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