TAXAJ

Conversion of Private Limited Company into LLP

A registered limited company in India (Private or Public) has a lot of complex formalities. It incurs additional overheads for managing affairs, including mandatory board meetings, maintaining statutory records, filing e-forms with MCA, etc. Absence of such mandates for LLP combined with advantages such as non-applicability of dividend distribution tax on profit repatriation, transfer of profit rules and deemed dividend profit issues, MAT provisions and many more.


Hence, LLPs involve the best practices of private companies and protect the freedom of partners, giving them the ability to decide the company's norms. In a nutshell, it combines the best features of various kinds of businesses.

Limited Liability Partnerships (LLP) have been emerging ever since the Companies Act, 2013 introduced it. LLP is a form of business entity, which allows individual partners & directors to be free from the liability part. Here the concept of joint liability of partners does not exist as in a partnership firm. LLPs are the preferred form of business as it is a specialized business structure that provides a limited liability concept of a company. LLP allows its members the flexibility of organizing their internal management based on a mutually agreed and drafted agreement, as is the case in a partnership firm.

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About This Plan

Get your Private Limited Company converted into LLP in the fastest possible manner.

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

It usually takes 7 to 10 working days.

Buy Now
Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Name approval in RUN
  • Digital Signature Tokens
  • Filing of Forms
  • Issue of Incorporation Certificate along with PAN and TAN
  • Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
  • Assistance in Opening Bank Account
Who Should Buy

  • Businesses looking to expand or scale operations on higher level
  • Businesses aiming to work globally or with reputed clients
  • Businesses looking to expand or scale their operations
How It's Done

  1. DSC Application

  2. Name approval form filing

  3. Preparation of Incorporation Documents

  4. Getting those docs signed by the respective stakeholders

  5. Filing of e-Forms with ROC

  6. Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

Documents Required

  1. Name, Contact Number and Email Id of all the Stakeholders.

  2. Directors Identification Number, if already.

  3. Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.

  4. Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.

  5. Latest Month Personal Bank statement of all the Stakeholders.

  6. Specimen Signatures of all Stakeholders.

  7. Few Proposed Business Names along with Objects.

  8. Latest Electricity Bill/Landline Bill of Registered Office.

  9. NOC from owner of registered office. (If Owned)

  10. Rent Agreement from Landlord. (If Rented/Leased)

  11. Brief description of main business activities of the proposed Company.

  12. Shareholding pattern (50:50 or 60:40) between the Stakeholders.

  13.  Authorised & Paid Up Share Capital of the Company.

Benefits, Process, Taxability of Private Limited to LLP Conversion!

Understanding LLP

Limited Liability Partnership is a combination of both Company and Partnership. It is especially suitable for small to medium-sized business enterprises. 

It is governed by Limited Liability Partnership Act- 2008 which came into force from April 1, 2008.  This Act was proposed for promoting the Micro Small Medium Enterprise (MSME). 

LLP registration has the advantage of self-governance and less compliance as compared to other types of corporate entities.

   Process of Conversion of Company into LLP

1. Obtain Director Identification Number (DIN)

The minimum number of designated partners for the incorporation of an LLP is two. One of them must be an Indian resident. Currently, DIN is allotted with company incorporation or adding a director or designated partner in a company/ LLP. Hence, first, such members need to be added as directors in the company to obtain DIN. DIN will be required for those who would become designated partners. Further, it is essential to apply for a DSC before applying for the DIN. A Body Corporate can also be a partner in a Limited Liability Partnership through a nominee.

2. Meeting of Board of Directors of Company

  • Call a meeting of the Board of Directors. 
  • Pass requisite Resolution for Conversion of Company into LLP. 
  • Pass requisite Resolution to authorize any director to file all the necessary forms with MCA.
  • Requisite resolution to authorize any director to file all the necessary forms with MCA. 

3. Application for Name Availability

The company will have to apply for reservation of name of LLP And GET NAME APPROVAL CERTIFICATE FROM ROC.

4. Filing of Incorporation Form with Required Documents 

File E Form FiLLiP with ROC along with following Attachments:

  • Address proof of the registered office of LLP. 
  • The subscription sheets. 
  • Consent to act as a designated partners and partners
  • Identity and Resident proofs of designated partners and partners 
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ designated partner.

5. Filing of Application for Conversion into LLP

  • Form 18 is the form for conversion of a company into an LLP. But it needs to be filed with Form for incorporation itself. 

    This form has information about the conversion of the company into LLP such as: 

    • Whether all the shareholders of the company have given their consent for the conversion of a company into the LLP.
    • If all the partners of the LLP comprise all the shareholders of the company and no one else. 
    • An up to date Income-tax return is file as per Income tax act, 1961.
    • Documents including the latest balance sheet and annual returns under the Companies Act, 2013 filed with MCA.
    • Validating if any conviction, ruling, order, a judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting as on date?
    • Getting to know regarding any security interest in the assets of the company is subsisting or still in force. 
    • Whether any earlier application for conversion of the said company into limited liability partnership was refused by the Registrar. 
    • If there is a presence of any secured creditors.

    File E-FORM- 18 with ROC along with following ATTACHMENTS: 

  • Statement of the consent of shareholders (Mandatory) 
  • Statement of accounts of the company certified as true and correct by the independent auditor 
  • List of all the secured creditors along with their consent 
  • Copy of acknowledgement of latest income tax return (Mandatory) 

6. Certificate of Incorporation as LLP from ROC

After complying to all the formalities by the company and approved by the Ministry, ROC to issues a COI as to the conversion of LLP.

7. Drafting of Limited Liability Partnership Agreement

Contents of Agreement are: 

  • Name of LLP 
  • Name of Partners & Designated Partners 
  • Form of contribution 
  • Profit Sharing ratio 
  • Rights & Duties of Partners 
  • Proposed Business 
  • Rules for governing an LLP

8. Filing of E-Form-3

  • This form provides information about the LLP Agreement entered into between the partners. This form is to be filed in 30 days from the date of conversion of the company into an LLP. 

    Attachment Required: LLP Agreement 

9. Filing of E-Form -14 (Intimation to ROC)

After receiving incorporation certificate of LLP it has to be filed within 15 days of the date of conversion. 

ATTACHMENTS OF E-FORM 14 

  • Copy of Certificate of Incorporation (COI) of LLP. 
  • Copy of incorporation document submitted in E-Form FiLLiP  to ROC. 
Taxation on Conversion

This transfer is not subject to capital gain tax due to the following conditions: 

👉 All the assets & liabilities of the Company now shifted to the LLP.

👉 All the shareholders remain the same. 

👉 The capital proportion remains unchanged.

👉 Profit-sharing patterns are in the same proportion.

👉 The shareholders do not receive any benefit, directly or indirectly. 

👉 The total sales, gross receipts, and turnover in any of the three preceding years from the conversion date not exceeding Rs. 60 Lacs.

👉 The total assets value in the Company's books of account in any of the previous three years does not exceed Rs. 5 crores.

Taxation on Conversion

It is best to know everything about Limited Liability Partnership in India. You will also discuss here the effects on taxation after conversion. The conversion of a Company into an LLP will not attract any capital gain tax as this is a conversion and not a "transfer" as defined under the Income Tax Act.

Effects of Conversion

The implications due to the conversion of a company into an LLP: 

👉 The private company is dissolved after conversion. 

👉 The name of the private limited company will remove from the register of the ROC. 

👉 The conversion will not affect existing liabilities, obligations, agreements, contracts and continued employment.


The company has to intimate all the authorities concerned about the conversion and make necessary changes in all the registrations and licenses.

Advantage of Conversion

👉 On converting a Private limited company into LLP, all assets and liabilities of the company will convert into those of the LLP. However, no instrument of transfer is required. Hence there will not be any stamp duty implications on such transfers as well.

👉 There is no limit to the number of partners, which is not so in the case of private limited companies. 

👉 There is no compulsion on holding a minimum number of meetings and maintaining statutory records.

Conclusion

As per the points discussed above, LLP is a more convenient form of organization than a company. This is true from a compliance and taxation point of view only. Best for small entrepreneurs and professionals mainly. But if you are a large enterprise or need to shuffle the directors or looking for some funding or investors, then Private Limited is best.