The introduction of LLP (Limited Liability Partnership) under the Limited Liability Partnership Act of 2008 in India has brought many advantages along with it such as
- limited liability for partners,
- perpetual existence,
- better access to credit,
- potential for growth,
- easy to transfer ownership, etc
for small and medium sized businesses. Taking into consideration the various benefits surrounding the LLP structure, it is certainly worth converting our existing partnership firm into a Limited Liability Partnership.
One of the major requirement for the conversion of Partnership into LLP is that the LLP formed from the Partnership have the same Partners as the original Partnership. The LLP formed cannot have new or less Partners than the Partnership firm. Therefore, if any Partners are to be added to the LLP, the Partnership should first be converted into a LLP and then Partners must be added to the newly formed LLP. On the other hand, if Partners are to be removed, it is best to remove them prior to starting the process for conversion of Partnership into LLP.
Steps for Conversion of Partnership into LLP:-
- DSC (Digital Signature Certificate) should be obtained for all the partners.
- DIN (Director Identification Number) must be obtained for all the partners.
- Name application should be made to the Ministry of Corporate Affairs. Name application for the conversion of partnership firm to LLP must be obtained before filing the Form 17.
- Filing of Form 17 along with the following documents or informationA statement of consent of partners of the firm.
A Statement of Assets and Liabilities of the firm duly certified as true and correct by the Chartered Accountant in practice.
A Copy of acknowledgement of latest income tax return.
A List of all the secured creditors along with their consent for the conversion.
- For the conversion of Partnership Firm into LLP, along with LLP Form 17, LLP Form 2 and LLP Form 3 must also be filed. LLP Form 2 contains incorporation document and subscriber’s statement. Along with LLP Form 2, the following documents must be submitted:
i.) Proof of address of registered office of LLP;
ii.) Subscribers’ sheet including consent;
iii.) In principle approval of regulatory authority, if required
iv.) Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner (if any).
- LLP Form 3 contains the initial LLP Agreement. This form can be filed once the Partnership Firm is converted into LLP or while filing for conversion of Partnership Firm into LLP. The LLP Agreement must be attached with LLP Form 3.
- On successful conversion of Partnership firm into LLP, the Registrar would issue Certificate of Incorporation of LLP. Once, the LLP is incorporated and the Partnership Firm is converted, the Partnership Firm would be deemed to be dissolved. Further, on conversion of Partnership into LLP, all properties, assets, interests, rights, privileges, liabilities, obligations of the firm is transferred to the LLP. In other words, the whole of the undertaking of the firm is transferred to the LLP.
However, any approvals, permit or license issued under any written law to the Partnership Firm will not be transferred automatically to the LLP. Therefore, fresh licenses or registrations may be required. This aspect of conversion of Partnership into LLP must be well considered before the conversion process.