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Conversion of Private Company to LLP

Limited liability partnership is a form of legal business entity with limited liability. It is an alternative corporate business vehicle that not only gives the benefits of limited liability at low compliance cost but also allows its partners the flexibility of organising their internal structure as a traditional partnership. The LLP is a separate legal entity and, while the LLP itself will be liable for the full extent of its assets, the liability of the partners will be limited.

An LLP is a separate legal entity that gives the benefits of limited liability of a company and the flexibility to organize the internal structure as a partnership. That’s why Many Companies and Partnership Firms want to voluntarily Convert into LLP because LLP contains elements of both ‘a corporate structure’ as well as a partnership firm structure.

    Prerequisites for Conversion of Private Company to LLP

    Not just the members, all the creditors of the company must also agree with the conversion.

    The latest copy of the Income-tax return is to be filed with ROC.

    All the members become the partners of an LLP.

    Every member of the company must agree with the decision of conversion.

    Documents Required for DIR 3 KYC

    The following documents have to be attached along with the application for conversion of the company into LLP:

    1. Certified Copy of the MoA & AoA of the Company
    2. Certified copy of Board Resolution to convert a Private Limited into LLP
    3. Address Proof – Electricity proof + NOC
    4. List of shareholders of Company
    5. Audited Financial Statements for a period beginning from the current financial year up to the date of Board meeting
    6. Declaration from all directors of a company that all the essentials of conversion of Private limited into LLP have been complied with
    7. Consent of each of the shareholders of the company for conversion of the firm into LLP in the given format.
    8. Form 3 – Form of application and declaration of incorporation of an LLP.

    From Proposed Designated Partners –

    1. Self-Attested Identity Proof of all the designated partners – Driving License/ Passport/ Voter Id Card
    2. Self-Attested Address Proof –Bank Passbook [front page + Transactions]
    3. Self-Attested PAN & Aadhar Card and Photograph
    4. Consent Letter by all the proposed Designated Partners to act as designated partners of the LLP

    Eligibility Criteria for Conversion of Private Limited Company into LLP

    A Private Limited Company can only apply for conversion when the following eligibility criteria are met –

    1. All Partners shall not have any security interest in the assets of the company prevailing at the time of application of such conversion.
    2. After the Conversion, all the Shareholders of the Company became the partner of LLP and no other person can become the partner of LLP at the time of Conversion.

    Advantages to converting a Private Company into LLP

    1. Unlimited Members: Minimum of two members are needed to register an LLP, and there is no restriction on the maximum members, unlike a Private Limited Company, which cannot have more than 200 members.
    2. No Paid-up Capital required: The most significant advantage of LLP is that it does not need a minimum paid capital. Whereas, Private Limited Companies have to contribute a minimum paid-up capital of INR 1 Lakh.
    3. Less Compliance burden: A Limited Liability Partnership only has to file Annual Return and Statement of Accounts each financial year. On the other hand, a Private Limited Company adhere to various annual compliances
    4. Tax exemptions– In terms of taxation, LLPs are privileged and are liable to pay for Income Tax without any implications of Corporation Tax or Dividend Distribution Tax.
    5. No compulsion on maintaining Statutory Records or holding Board Meetings– The internal structure of an LLP can be handled with ease as there are no stringent rules and regulations.
    6. No compulsion on Account Audit- Irrespective of the Share Capital, every Public or Private Limited Companies have to get their account audited. Perhaps, LLP is required to get the accounts audited only under two conditions:
      1. When the contribution exceeds INR 25 Lakhs;
      2. If the Annual Turnover is more than INR 40 Lakhs.

    Procedure for Conversion of Company into LLP

    1. Conduct Board Meeting
    1. The notice of the Board meeting will be served to all the Board members of the company at least 7 days before the date of the Board meeting.
    2. In the board Meeting proposal to convert the private limited into LLP shall be stated.
    1. Obtain DIN/DSC (if required)

    In Second Step, companies have to obtain DIN for Directors and DSC for all the members of the company who shall become the partners of the company as all the forms for conversion shall be signed digitally.

    1. Reservation of Name – RUN LLP

    After the Board Resolution Company has to Reserve Name for an LLP and the RUN LLP form shall be filed with the MCA.

    1. Filing of FiLLiP Form & Form 18

    After the Approval of the Name of Proposed LLP, the applicant is required to file the FiLLiP Form along with Form 18 before the MCA for the conversion of Pvt. Ltd. into LLP.

    1. Authorization by the Registrar.

    After the Authorization of Registrar and the Companies Application complies with the provisions of the LLP Act, 2008 and the Companies Act, 2013 then the Registrar shall accept the form and send the certificate of Incorporation to the applicant.

    1. Intimate to the Registrar of Companies about the Conversion of Private Company

    Once the Registrar of LLPs has sent the Certificate of Incorporation then the next step is to intimate about such conversion to the Registrar of Companies within 15 days in Form 14 from the date of conversion.

    1. Filing of Form 3(LLP Agreement)

    After that LLP shall file the LLP Agreement by filing Form 3 within 30 days from the date of conversion before the MCA in a prescribed manner.

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