Partnership

to LLP (Limited Liability Partnership)

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How to Start Partnership to LLP (Limited Liability Partnership)

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Benefits of Conversion Of Partnership to LLP

  • Flexibility and Ease of Management :The LLP business structure provides more flexibility to the serving partners when it comes to addressing daily tasks. Such business structures are covered under the Limited Liability Partnership Act, 2008, which promotes flexible governance and ease of management.

  • Enduring Succession :Unlike a traditional partnership, the LLP remains unaffected by events such as the demise of the partner. LLPs can face adversity more effectively than partnership firms.

  • Investment Opportunities :The strong corporate structure of LLP attracts substantial investment opportunities unlike traditional partnerships.

Difference Between Partnership Firm and LLP

  • LLP has the advantage of operating as an independent legal entity unlike a partnership firm.

  • Unlike LLP, in a partnership firm the personal assets of the members are always at risk due to unlimited liability.

  • The prevailing law mandates the LLP to maintain a book of account which is not otherwise mandatory for a partnership firm.

  • Unlike LLP, DSC is not required in case of Partnership firm (DSC required for GST return filing).

  • DSC (Digital Signature Certificate) is Necessary for LLP Registration Under the LLP Act, 2008.

  • There is a Number of limits under the Partnership Act 1932 on how many members can be a part of a partnership firm. Also, LLP does not face such a Legal effort.

Conditions for Partnership to LLP conversion

  • The norms relating to participation in LLP conversion are copied under section 66 of the LLP Act, 2008[1] read with schedule II of the Act.

  • Any change in the management of the partnership firm during the filing of the application is unacceptable for conversion purposes. Any change in management can happen after the conversion.

  • It is a command for all serving partners to protect Digital Signature Certificate, DPIN/DIN meet conversion legalities.

  • The partnership Firm must fall Under the Partnership Act, 1932.

  • Consent of all serving partners is also required in this regard.

Procedure For Partnership to LLP Conversion

The below section covers the process of participation in LLP conversion:

Step 1 : Name Approval and digital Signature

Proposed business name approval is the first step in the conversion process. For this the applicant firm has to file an online application with the licensing authority. For additional registration formalities, the designated partners should have a Digital Signature Certificate. DSC is required to validate e-forms and various other documents electronically.

Step 2 : Form filing with the Roc

File Form 17 (Partnership Related Application for LLP Conversion) along with ROC. It should include the following details;

  • Service Request Number generated for RUN-LLP Form.

  • Name of the proposed LLP

  • Firm name, address and registration details

  • Details like no. and capital contribution of partners

  • details of creditors

  • The said form must be attached with the following attachments;

  • Details of partners showing their confirmation for participation in LLP conversion

  • Financial information of the firm validated by a chartered accountant

  • Copy of latest IT return receipt

  • List of all secured creditors and their permissions

  • Any other required dossier

Step 3 : File incorporation Form Fillip

The application form should be accompanied by the following;

  • Details of run-llp (it will be auto-populated)

  • Registered Office Address and Email Contact of the LLP

  • Registrar's Office

  • Nature of business ventures

  • Details related to Partners, Designated Partners, their DPIN, DIN and PAN

  • Sum of Partner’s Contribution to the Firm

  • The Duly filled up Filling Form must carry the following attachments.

  • Address proof relating to the LLP’s Registered office

  • Subscriber's consent

  • NOC issued by the owner of the premises along with a copy of the utility bills which should be latest

  • consent of a licensing authority

  • Details of any company where the respective partner is holding the position of Director/Partner.

  • Proof of address and identity of the applicant

  • Where the LLP has the same name as an existing LLP/firm, NOC from the LLP/firm or a copy of the Board resolution is mandatory.

The said forms must encase the signature of the proposed appropriated partners and be authorized by CA, CS, or a chartered accountant. The fee for such registration differs in accordance with the amount of capital contribution.

Step 4 - Issuance of certificate of Registration

RoCs issues the registration certificate of LLP after successful document vetting.

Step 5 - Furnish LLP Agreement

The LLP agreement must be submitted in Form LLP-3 within thirty days from the date of incorporation. It has to attach the following details.

  • LLP Name

  • Name of the Nominated Partners

  • Form of Capital Contribution as well as Profit-Sharing Ratio

  • Provisions Regulating LLP

  • Rights and Liabilities of Nominated Partners

Step 5 - Intimation to the Registrar

The Registrar of Firms should be informed about the participation in LLP conversion and other details within fifteen days from the date of incorporation through Form-14. The application form must be carried;

  • copy of certificate of incorporation

  • A copy of the documents attached with Form FiLLiP.

It eliminates the process related to LLP conversion from partnership. It is pertinent to note that the old permits and licenses issued to the partnership firm will not cease to be effective after successful conversion.

Effects of Partnership to LLP Conversion

  • An LLP can use a name other than listed in the registration certificate

  • All finances, privileges and rights vested in the firm should be transferred to the LLP.

  • The firm shall cease to operate under the Indian Partnership Act 1932. Its credibility will be removed from the record.

  • The pending cases will be transferred to LLP after completing the process of Partnership to LLP conversion. The same is true for past judgments or orders in favor of or against the firm.

  • All existing agreements and contracts shall continue to be effective with the LLP as party

Liabilities of Partners before conversion

Each partner shall be collectively accountable for all obligations of the firm, whether relating to finance or any other matter. If a partner discharges the liability, he will be compensated by the LLP.

Conversion Notice

After conversion it is mandatory for every LLP to draft a notice related to the conversion. The said notice should contain key details which include;

  • date of conversion

  • Firm's Incorporation Number

This notice will help the LLP to address incident-based compliances in future. As per the LLP Act, 2008, the said requirement should be met within a period of 12 months. This deadline will be effective after 14 days from the date of incorporation.

Failure to fulfill this condition will attract a fine of Rs 10000 Rs 10000 for the defaulting company. In case of frequent violations, a minimum fine of Rs 50/day and a maximum of Rs 500/day will be imposed.

Conclusion

Partnership to LLP conversion is a difficult and complicated process that involves a lot of paperwork. If you are not doing paperwork. If you are not comfortable meeting the above conversion requirements, hire a professional for such purposes. At Corpbiz, our professionals can handle the legalities on your behalf and get the desired conversions in a hassle-free manner. Get Partnership to LLP conversion with LegalTax

Frequently Asked Questions (FAQs)

LLP has a separate legal entity under the law. A partnership firm has no separate legal status other than its partners. The liability of the partner of the LLP is limited to the extent of their capital contribution to the LLP. The liability of the partner of a partnership firm is unlimited.

Concept of “Limited Liability Partnership”

LLp is a separate legal entity, liable for the full extent of its assets but the liability of the partners is limited to their agreed contribution to the LLP.

Some LLP examples may include veterinarian's offices, dental offices, auditing firms, law firms, financial advice services, business consulting and real estate agencies. However, state laws may place restrictions on the types of businesses that can use this partnership model.

A limited partnership exists when two or more partners go into business together, but the limited partners are only liable up to the amount of their investment. An LP is defined as a limited number of partners and a general partner, who have unlimited liability

For example, real estate investors can use limited partnerships. Another common use of a limited partnership is in a family business, called a family limited partnership. A family member can deposit their money, nominate a common partner, and watch their investments grow

Benefits of LLP

  • Limited liability protects the member’s personal assets from the liabilities of the business. LLP is a separate legal entity for the members.

  • Resilience.,

  • LLP is considered a legal person.,

  • Corporate ownership.,

  • Nominated and non- nominated members.,

  • To protect the name of the partnership.

Among the many benefits of converting a partnership firm into an LLP, you can check out that no capital gains are made in the taxation process. There is proper paying of tax on time, and no tax is also levied on transactions or conversions.

Companies which cannot be converted into LLP :

Companies that engaged in the businesses of banking, finance and insurance

Another comparison between the two entities is the process for resolving the management structure. As mentioned, an LLC may have only one member, while an LLP must have at least two partners.

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