Procedure for Conversion of Private Limited Company into LLP

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Procedure for Conversion of Private Limited Company into LLP

On account of its flexibility, compliance, tax, and performance, LLP can be useful for small and medium-sized businesses, in general. Internationally, LLPs are the preferred business vehicle, especially in the service or professional industry. Conversions from an existing business structure can be made to LLP while maintaining the benefits of Limited Credit and Minimum Compliance. This article highlights the concept of procedure for conversion of Private Limited Company into LLP.

Table of Contents-

What is Limited Liability Partnerships (LLP)?

Limited Liability Partnerships (LLP)emerge as a well-known business structure with many benefits. It is a simple but integrated business approach where all the positive aspects of the Company and the Partnership firm are present. It is a substitute business venture that offers the benefits of a limited corporate debt and the flexibility of the partnership. The LLP is a separate legal entity, responsible for full assets but the liabilities of its partners are limited to their consented contribution to the LLP.

LLP can continue its existence without looking at changes in partners. It can enter into contracts and hold assets in its name. In addition, no partner is liable for the private or unauthorized actions of other partners, thus individual partners are protected from the collective debt created by another partner’s wrongful business decisions or misconduct. Since LLP contains the elements of both ‘business structure’ and ‘partnership structure’ LLP is the hybrid of company and partnership.

Certificate of Registration

LLP must notify the registrar of the company’s conversion to LLP within 15 days from the date of conversion. The information must be processed on Form 14. The Registrar, upon completion of the required formalities, will issue a certificate of registration. If the Registrar refuses to change, a limited private company may appeal to the tribunal.

If the properties are registered in the name of a company, the LLP must notify the transaction details of those officials, as well as the LLP details.

Conversion Fee

The conversion fees of a private company limited into LLP are as follows:

  • LLP contribution maximum to Rs 1, 00,000 – Rs. 500.
  • LLP contribution of more than Rs 1, 00,000 but is limited to Rs 5, 00,000 – Rs. 2000.
  • LLP contribution of more than Rs 5, 00,000 but is limited to Rs 10, 00,000 – Rs. 4000.
  • LLP with a contribution of more than Rs 10, 00,000 – Rs. 5000.

Requirements for the conversion of a company into an LLP

Requirements for the conversion of a company into an LLP

Eligibility

The conversion of a limited private company into an LLP can be  done under the following circumstances:

  • The company does not have a security interest on its assets at the time of application.
  • LLP partners will not be anyone other than the company’s shareholders.

Documents Required to Transform a Company into an LLP

Documents Required to Transform a Company into an LLP

The Outcome of conversion of Private Limited Company into LLP

  • In the procedure for conversion of a Private Limited Company into LLP, all assets, privileges, interests, rights, liabilities, and obligations of a private limited company are converted to the LLP.
  • The private company will be considered dissolved.
  • The name of the private company will be removed from the Registrar of Companies‘ register.
  • Licenses/permits issued under any law in written form to the Private Limited Company, and those valid before the date of conversion, are not automatically transferred to the Limited Liability Partnership. The license terms will be part of the decision here. Therefore, in most cases, a new GST registration or FSSAI registration will need to be obtained by promoters.
  • Conversions do not affect existing debts, obligations, agreements, contracts, and ongoing work or employment.

Procedure for conversion of Private Limited Company into LLP

Procedure for conversion of Private Limited Company into LLP

Conversion of Company in India

Final words

According to the discussions above, LLP is a much simpler type of organization than a company in terms of tax compliance. Therefore, it may be more suitable for small businesses and professionals in particular. Conversions from an existing company can be made to LLP while maintaining the benefits of Limited Liability and limited compliance.

Neelansh Gupta is a dedicated Lawyer and professional having flair for reading & writing to keep himself updated with the latest economical developments. In a short span of 2 years as a professional he has worked on projects related to Drafting, IPR & Corporate laws which have given him diversity in work and a chance to blend his subject knowledge with its real time implementation, thus enhancing his skills.

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