March 30, 2024 / Company Law Compliances

Conversion of Partnership Firm into LLP

Table of Contents

Convert Partnership Firm to LLP – Documents Required, Procedure

Introduction

Partnership, Limited Liability Partnership, Private Limited Company, One Person Company, Sole Proprietorship, Public Company –When it relates, to business a country like India offers a series of alternatives. As a businessman, you have the option of choosing amongst various business models. However, before making a decision, you should be aware of the advantages and disadvantages of each option. You must determine which form will be most beneficial to you and your corporation.
Each of these forms has its own set of criteria, benefits, and drawbacks. When it regards to partnerships, one of the most significant disadvantages is that it exposes its partners to unlimited liability. This feature puts the partners’ own assets in danger. There are firms and companies with restricted obligations that can help to mitigate this danger.
Limited Liability Partnership and Private Limited Company are their names. Nowadays, entrepreneurs are converting their partnerships to these two types of businesses in order to minimize the risks that partnerships entail. But how does this transformation happen?
In recent years, there has been a greater move from traditional partnerships to Limited Liability Partnerships (LLPs). The rationale for this is that LLPs provide greater freedom, as well as unrestricted partners and other benefits. However, the actual reason for the transition is that LLPs provide a significant benefit in terms of limited liability.
When it comes to LLPs, the strain on the partner’s personal assets is alleviated because they are a mix of a partnership and a private limited company. Small and medium-sized organizations find that this organizational structure is ideal for their needs.

partnership Firm benefit

The benefits of a Limited Liability Partnership (LLP) exceed the disadvantages of a standard partnership. The main reasons for a partnership firm to convert to an LLP are limited liability, perpetual succession, and unlimited partners.

The Advantages of Converting a Partnership to an LLP

The following advantages can be obtained by converting a partnership to an LLP:

Increased in Investment: The amount of money invested in the LLP would increase if the partnership was converted to an LLP. The entity’s reputation would improve as a result of the conversion, causing additional investors to invest in the LLP.
Perpetual Succession: The departure or death of a partner does not result in the partnership firm’s dissolution. The LLP would be subject to the perpetual succession principle.
Liability Restriction: When a partnership is converted to an LLP, the partners are automatically granted limited liability status. Limited liability would provide the firm’s partners with some independence. The partners’ liability is separated from the firm’s liabilities.
Management’s Choice: In comparison to a regular partnership firm, converting a partnership to an LLP increases the degree of flexibility and decision-making process in an LLP.
Direct Foreign Investment (FDI): The Indian government has eased the rules on foreign direct investment in limited liability partnerships (LLPs). When compared to a partnership, an LLP allows for more FDI.

Main Differences Between a Partnership and an LLP

Differences between LLP and Partnership Firm

Basis of Difference	Partnership Firm	Limited Liability Partnership
Applicable Act	Limited Liability Partnership Act, 2008	The Indian Partnership Act, 1932
Registered to	Ministry of Corporate Affairs(MCA) registered the LLP	Registrar of Firms registered the Partnership Firm
Liability	One of the most significant distinctions between an LLP and a partnership is the liability of the partners. Because the partner and the firm are seen as independent legal entities. As a result, the partners’ liability is limited to the amount invested in the business.	Because the firm and the partner are not regarded different legal entities. As a result, partners are personally liable for the partnership’s unlimited liabilities.
A number of partners and requirements	· No. of Partners required is minimum 2 and no limit for maximum partner · Any minor cannot be partner	· No. of Partners required is minimum 2 but not more than 20 are allowed. · Any minor can be partner
Agreement between partners	The LLP Agreement regulates the LLP’s operations, management, decision-making procedures, and other activities.	The partnership’s operation, management, and decision-making procedures, as well as other activities, are governed by the partnership deed.
Transferability /Conversion	· Shares can be easily transferred to another person after obtaining the required consent from all the Partners in an LLP. · The transferee cannot become partner automatically. LLP cannot be converted back to the partnership but can be converted to Private Limited Company or Limited Company easily.	· Shares can be transferred to another person after obtaining the required consent from all the Partners in a Partnership. · Transferability of the partnership a is a lengthy process. · Conversion of partnership to LLP or Private Limited Company is a burdensome process
Compliances	Compulsory to file the annual return to Ministry of Corporate Affairs. You can get LLP Annual filing with Rajput Jain & Associates at just Rs 2499/-	No requirement of annual return filing
Registration Cost	Get LLP Registration online for Rs. 7999/- only.	Get partnership registration online for Rs.2199/- only.

Documents for Conversion of Partnership to Limited Liability Partnership (LLP)

For the conversion of a partnership to an LLP, the following documents are required:

Proposed Limited Liability Partnership (LLP) Name
Information on the partnership firm’s Partnership Deed
Digital Signature Certificate of the Respective Partners
LLP’s Authorised Capital
Registered office details of the partnership limited entity
Identification Documents of the Partnership- Voter ID and other related information
Utility Bill of the Partnership Firm- Electricity Bill/ Water Bill or any other Bill
Evidence or Proof of the Partnership’s Registered Office (Lease deed/Ownership Documents) of the property
Permanent Account Number (PAN) of all the Partnership’s Partners
Audited Partnership Information
Statements such as the Partnership’s Bank Details
The Partnership Business’s Main Objectives
If the premises are rented, a letter of authorization from the owner is required.

Document required after incorporation of LLP

Copy of Incorporation ceritificate of LLP
Document require to submitted for Fill LLP

Conditions for Converting a Partnership Firm to a Limited Liability Partnership (LLP)

Section 55 of the Limited Liability Partnership Act 2008, read with Schedule II of the Act, governs the conversion of a partnership firm to an LLP.
All of the firm’s partners must be LLP partners, which means no new partners can join or existing partners cannot leave while the application is being processed.
Before submitting an application, all partners must have a valid Digital Signature Certificate (DSC) and at least two partners must have a DPIN.
The converting partnership firm must be registered under the Partnership Act of 1932.
The consent of all partners must be acquired.
The LLP’s partners must be the same as the partnership firm’s. After the conversion is complete, any partner who chooses to be removed from the LLP may do so.
All Designated Partners must obtain a Director Identification Number (DIN)/Designated Partner Identification Number (DPIN).
Procedure for Converting a Partnership to a Limited Liability Partnership (LLP)

Processing Step for converting Partnership Firm into LLP

1^st Step: Approval of Name and Digital Signature Certificate (DSC)

Approval of name

Create an account and then log in to the MCA site.
Select the “RUN – LLP” option under the MCA Services menu.
Reserve Unique Name is States for RUN.
Select the option “Conversion of Firm into LLP” from the selection list.
There are two proposed names for the LLP to be given after that.
Any supporting papers may also be supplied in PDF format, followed by a click on the “Submit” button.
The page is redirected to a payment gateway, where the form’s fees of Rs. 200 must be paid.
The reserved name then has a 90-day validity term.

Digital Signature Certificate (DSC)

The Designated Partners of the LLP must have their individual Digital Signature Certificates in order to move past the Name Incorporation stage.
To enable a successful submission, each e-form requires the Designated Partners’ DSCs to be affixed to the applicable forms.

2^nd Step: Submitting Forms to the ROC

Form 17 (Application and Statement for conversion of a firm into LLP)

The application form must include information such as:

- The RUN – LLP form’s Service Request Number (SRN).
- Proposed Limited Liability Partnership (LLP) name
- The firm’s name, address, registration, and partnership agreement.
- Information of the number of partners and the capital investment required.
- Information of secured creditors

The following attachments must be submitted:

- Statement of Consent of the Firm’s Partners.
- A Chartered Accountant in Practice’s certification of the firm’s assets and liabilities.
- A copy of the most recent acknowledgement of ITR.
- A list of all secured creditors, with their permission.
- Any further supporting data (optional).

Fill out FiL LLP (Form for incorporation of LLP)

Following must be filled out on the application form.

- Details of the RUN – LLP, which will be auto-filed,
- The LLP’s registered office address and email address.
- The Registrar’s Office
- The nature of the company’s operations.
- Information about the partners, including their DINs, DPINs, and PANs.
- The amount of money put in by the LLP’s partners.

Required as an attachment

Proof of address of the LLP’s registered office..
Consent of the subscriber.
A letter of authorization from the property owner as well as a copy of the utility bills (not more than 2 months old).
Approval from any regulatory authority, if applicable.
Information about any LLP/Company in which a designated partner also serves as a director/partner.
The applicants’ proof of identification and address.

Where the LLP’s name is identical to that of an existing Company/LLP, a copy of the existing LLP’s Board Resolution or Consent serves as a No Objection Certificate.

The proposed designated partners must e-sign both forms and have them approved by a Cost Accountant, a Company Secretary, or a Chartered Accountant, all of whom must be in full-time practice. The amount of the charge will be determined by the amount of capital commitment.

3^rd Step: Obtaining a Certificate of Registration

On approval of the application, the Registrar will issue the LLP’s Certificate of Registration.

4^th Step: Form a Agreement of Limited Liability Partnership (LLP)

Within 30 days of the LLP’s incorporation, the LLP Agreement must be presented in Form LLP-3. It must include the following information:

The LLP’s name
The names of the designated partners and other partners
The capital contribution and profit sharing ratios
The LLP’s rules
Partners’ rights and responsibilities

5^th Step: Intimation to the Registrar of Firms

Within 15 days after the date of formation, the Registrar of Firms must be notified of the conversion into an LLP and the LLP’s associated details in Form – 14.

The following papers must be presented with the form:

• A copy of the LLP Incorporation Certificate; and

• A copy of the incorporation documentation filed in Form FiLLLP.

Once all of these stages have been completed, the conversion from a partnership to an LLP is complete in every way. It should be noted, however, that the existing licenses and permits do not transfer to the LLP. For post-conversion, they must be administered freshly.

Documentation To be Filed

All partners must file a statement with the Registrar, specifying the firm’s name, registration number (if any), and the date it was registered under the Indian Partnership Act 1932 or any other law.
The incorporation document, along with a statement in the prescribed form signed by a chartered accountant/company secretary/cost accountant/advocate who is involved in the formation of the LLP and anyone else who subscribed to the incorporation document, must be filed with the Registrar, attesting to the fact that all incorporation requirements have been met.

Registration

The Registrar may accept or refuse to register the LLP after obtaining the necessary paperwork. The Registrar will issue a certificate of registration if all documents are deemed to be correct and in compliance with the act’s stipulations.
The LLP must notify the Registrar of Firms with which it is registered in Form 14 within 15 days after registration. In the case that the Registrar refuses to register you, you can file an appeal with the tribunal.

Registration’s Effect

An LLP is formed under the name specified in the certificate of registration.
All of the firm’s assets, obligations, rights, and privileges will be transferred to the LLP.
The firm will be dissolved, and if it was registered under the Indian Partnership Act 1932, it will be deleted from the records; all outstanding processes against the firm will be enforced against the LLP.
Any ruling or judgment, whether favorable or unfavorable, may be enforced against the LLP.
All current contracts and agreements to which the firm was a party will remain in effect with the LLP as a party.
Any current appointment or authority bestowed on the firm must be treated as if it were bestowed on the LLP.

Liability of Partners Prior to Conversion

Each partner will be equally and severally accountable for all of the firm’s liabilities and obligations accrued prior to the conversion. The LLP will indemnify any partner who fulfills his or her obligations.

Notice of Conversion

The LLP must provide for a 12-month period, which must begin no later than 14 days following registration: –

In every official correspondence of the LLP, a declaration indicating it was converted from a firm to an LLP as of the date of registration specified, as well as the name and registration number(if any) of the firm from which it was converted.
If the LLP violates the aforementioned rule, it would be subject to a minimum fine of Rs 10,000 and a maximum fine of Rs 1,000,000. If the default continues, the minimum fine is Rs 50 per day, and the maximum fine is Rs 500 per day.

LLP Form No. 17

This is an application and statement for a firm’s conversion to an LLP. The form is split into two sections: Part A is for the application, while Part B is for the statement.

Part A, Information to be Provided: Application

If the Reserve Unique Number (RUN) form has previously been filed, the SRN. If not, the LLP’s suggested name.
The firm’s name and address.
Information about the firm’s registration under the Indian Partnership Act of 1932 or any other law.
The date of the agreement, which contains information on the firm’s founding.
The firm’s total number of partners.
Information on all partners’ consent.
Information on the LLP’s shareholders, which include all of the LLP’s partners and no one else.
Information from a tax return filed under the Income Tax Act of 1961.
Information on any pending court, tribunal, or other authority proceedings.
Whether the Registrar has previously rejected a conversion application. If so, the SRN as well as the grounds for the refusal must be provided.
Information about any ongoing convictions, orders, or judgments in favor or against the firm by any court, tribunal, or other authority.
Whether any secured creditors exist. If yes, whether all secured creditors have given their agreement to the conversion.
Is there any kind of clearance or approval needed for the LLP conversion? If the answer is yes, whether or not the approval has been acquired.

Part B: Statements

The declaration’s contents
The partner’s consent to the firm’s conversion to an LLP.

The partner must acknowledge that he or she is jointly and severally accountable for all liabilities incurred prior to the conversion.

He or she must state that: – All of the requirements of the LLP Act 2008 and the rules have been met. – That all of the firm’s partners are also LLP partners, and no one else. That all of the necessary permits have been received. – That all secured creditors have given their consent. – To the best of his knowledge and belief, all information supplied in the form is accurate.

Attachments

A firm’s Statement of Assets and Liabilities fully certified as truthful and correct by a practicing Chartered Accountant.
A statement of the company’s partners’ consent.
A list of all secured creditors, together with their permission to convert.
A copy of the most recent income tax return’s acknowledgement.
Any authority or body’s approval.
Any optional attachments, if applicable.

The e-form must be digitally signed by a designated partner and include the designated partner’s DIN/DPIN as well as a PAN number if none of the designated partners have a DIN.

A Chartered Accountant, Company Secretary, or Cost Accountant in full-time practice shall do the certification. It is necessary to choose an associate or fellow, and a membership number/certificate of practice number must be provided. Form 14 is used to submit notification to the Registrar.

The following details must be provided: –

The firm’s name.
The company’s main address.
Information about the firm’s registration under the Partnership Act of 1932 or any other statute.
Information on the LLP into which the firm has been converted is also required.
A copy of the LLP’s certificate of incorporation must be attached, and the form must be digitally signed by the partner.

Learn more about converting a partnership to a limited liability partnership (LLP).

Refer to the following articles for more information on converting a partnership to an LLP:

Partnership to Limited Liability Partnership (LLP) conversion
The Difference Between an LLP and a Partnership Firm
Why Convert a Partnership Firm to an LLP

IFCCL can assist you with the entire conversion procedure and make it a lot easier for you. Included in the Package

The procedure for converting a partnership to a Limited Liability Partnership (LLP).
End-to-end documentation
Liaison with regulatory authorities for this procedure
Certificate of No Objection from required IT authorities
Submitting documentation to the appropriate authorities

Frequently Asked Questions on Convert Partnership Firm to LLP

Q.: Why is it necessary to convert a partnership to limited liability partnership (LLP)?

Given all of the foregoing disadvantages of a regular partnership, converting a partnership to an LLP is the best alternative available. An LLP is a separate legal entity that exists independently of the firm’s partners.
Because the partners’ responsibility is limited, creditors will not pursue them for any debts or dues owed to the partnership firm.
A limited liability partnership (LLP) combines the advantages of a typical partnership and a private limited company. As a result, this type of hybrid entity is appropriate for people that require a great deal of flexibility.

Q.: What is the partnership’s strength at the moment of conversion?

The number of partners must be the same at the time of conversion. There must be no increase or decrease in the number of partners in any way.

Q.: What is the maximum number of names that can be reserved for the LLP?

The name of the LLP must be reserved in advance by the firm’s partners as part of the conversion process. This name reservation procedure or process can be completed online. The partnership would be allowed to reserve a maximum of six names. For the partnership firm, these names must be listed in order of preference. During the conversion of partnerships, the registrar may also request that the LLP apply for a new name.

Q.: What are the requirements that an LLP must follow when it comes to naming?

The partners must adhere to the following guidelines while naming the partnership:

The name must not be infringing on any intellectual property rights in India.
The LLP’s name must be unique and distinctive in character;
it must not mislead anyone, especially the general public; and it must not violate any Indian public or constitutional law.

Q.: What does it mean to contribute capital to an LLP?

The amount of capital contribution must be stated by the respective partners when converting a partnership into an LLP.

Q.: Is it necessary for a director to have a DIN in order to administer an LLP?

In most cases, an LLP will have partners. A director identification number is required for any director who is selected to carry out the LLP’s responsibilities (DIN). The independent directors of an LLP must comply with such standards.

Q.: Why should you choose an LLP over a partnership firm?

Apart from the major distinctions, the LLP has a few characteristics that make it a better choice than a traditional partnership firm:

Management Freedom/Leeway: The partners are granted a reasonable amount of flexibility in running the LLP’s operations and day-to-day activities. The Limited Liability Partnership Act of 2008 has little impact on the LLP Agreement, which implies that the Act is rather flexible in terms of how the agreement can be written.
Perpetual Succession: Unlike ordinary partnerships, the LLP continues to exist even if one of the partners dies.
Attractiveness to Investors: LLPs are attractive to foreign investors and venture capital funds because they have a corporate structure and are more organized than regular partnerships.
Multidisciplinary LLPs: An LLP allows professionals from multiple disciplines to collaborate, which is a unique trait and an advantage in and of itself.

Q.: What are the conditions for becoming Partner of LLP?

There are some pre-requisites condition must be followed for becoming partner of Limited Liability Partnership Firm:

The age of Partner is more than 18 years
The partner must not have any form of disqualifications
The partner must not be criminally liable
The partner must not be insolvent

Q.: Who can be partner in the partnership Firm ?

Who can be partner in the partnership Firm

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