How to Convert Partnership Firm into LLP?
Today, many small businesses opt for the LLP option from a partnership firm. It is because LLP has many benefits over a traditional partnership firm such as limited liability of partners, perpetual succession, and flexibility.
Option of Conversion of Partnership Firm into LLP helps in better management of a company. It also gives the benefit of choosing unlimited partners in a firm. Unlike before, it is easy today to get LLP registration. The process to convert a partnership firm to LLP is very simple and quick. In this blog, we will discuss the whole procedure to convert a traditional partnership firm to an LLP firm.
Acts governing the process for conversion of partnership firm into LLP
The major acts governing the process of converting a partnership firm into an LLP are:
- LLP Act 2008
- Schedule 2 of LLP Act 2008
Who is eligible for conversion of a partnership firm into a limited liability partnership firm?
Any existing firm can opt for conversion of a partnership firm into a limited liability partnership firm. All the partners of the firm must be present while converting a partnership firm to an LLP firm.
Important things to consider before applying for converting a partnership firm into an LLP firm
While converting a partnership firm into an LLP firm, you need to consider some things such as:
- All the partners of the partnership firm must apply for conversion in writing.
- At least 1 designated partner should be a resident of India.
- Every partner must contribute the amount to the LLP firm in the same amount that they contributed to the partnership firm.
- Partnership firms must file Income Tax Returns regularly.
- It is necessary to take prior approval from the required authorities.
- You must take the permission of all the secured creditors while applying for conversion of a partnership firm into an LLP firm.
Process of Converting a Partnership Firm Into an LLP firm
Today, it is simple and speedy to do Online LLP Annual Filing on the official site. Some of the easy steps to convert a partnership firm into an LLP firm are:
Adding LLP to a Firm’s Name
When you convert a partnership firm into an LLP firm, you must add the words Limited Liability Partnership or LLP to the name of the firm. Approval for the name is valid for 90 days after getting this approval.
Filing an Incorporation form
eForm FILLIP must be filed after getting approval of the firm’s name. Documents required for LLP registration are listed below:
- Utility bills of your registered office which are not older than 2 months
- Consent of all the partners of the firm
- Identity proof with address proof of subscribers
- Sheet of subscribers signed
- NOC copy of existing partnership firm
- Company’s details in which partner is a director or a partner
While going for conversion of a partnership firm, you have to fill out eForm 17 and submit the following documents:
- Consent of all the creditors for conversion of a partnership firm into an LLP firm.
- Approval from all the required authorities and local bodies.
- Statement of assets and liabilities certified by CA
- Partnership deed of existing partnership firm
- Certificate of partnership firm registration issues by Registrar of Firms
- Statement of Partners according to the Schedule II
- Acknowledgment copy of LLP Annual Filing returns
Approval for Re-Submission Refusal by Registrar
After getting approval, Registrar will provide an Incorporation Certificate. If the Registrar rejects your approval, you can appeal to the Tribunal. He will consider your case and help to get quick approval.
Intimation to the Firm Registrar
After the date of conversion, the LLP firm has to inform the registrar of firms within 15 days. It has to also submit some other documents such as:
- Copy of Incorporation certificate of LLP
- Copy of Incorporation documents
It is necessary to file Form 14 manually by signing it and submitting it to Firm Registrar.
This is the final step in the process of LLP firm registration. You must file eForm LLP 3 with the Registrar within 30 days from the conversion date. You must also submit the LLP Agreement along with LLP-3.
After LLP incorporation, the Partnership firm will be dissolved. All the assets, rights, liabilities, privileges, and properties are transferred to the LLP. The whole firm is transferred to an LLP firm.
Benefits of Choosing an LLP Registration
Many partnership firms today go for an LLP firm registration because of various benefits such as:
Longevity or Perpetual Succession of a Company
The working of an LLP firm is different from a partnership firm. Even after the death of all the partners, the firms will still exist and work like before. The benefit of perpetual succession is the advantage of why partnership firms go for LLP registration in India.
No Minimum Capital for Registration
You can begin an LLP firm by investing any amount of capital. There is no minimum capital requirement in starting an LLP firm. Partnership firms with limited capital should go for an LLP firm.
No compulsory Auditing
An LLP firm is not required to get its accounts audited every year. However, an LLP firm has to get its accounts audited in the following two situations:
- Contributions made by LLP firm exceeding INR 25 lakhs and
- Annual turnover of LLP firm increasing by INR 40 lakhs
It is easy to do LLP Annual Filing Online on the official site.
Forming an LLP firm has several benefits for the partners of the firm. They do not have to pay taxes on their share or income. Apart from that, the partners will also get bonuses, remuneration, or commission as deductions.
Today, you can hire professionals to carry out the procedure of LLP firm registration. These professionals will do everything from filing forms to Online LLP Annual Return Filing in India. You will also get discounts on LLP Annual Filing in India from these professionals.
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