Steps for Converting a Private Limited Company to an LLP

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Steps for Converting a Private Limited Company to an LLP

Businesses operating as private limited companies often resort to getting converted into LLP. The choice comes out of the fact that you still get the perks of private limited companies, but this time, with lesser compliances because of LLP incorporation. Private limited companies enjoy their own set of benefits but is it the best-suited format for your business?

If not, then it’s better to go with the constitution that helps the seamless operation of your business. If you find operating as a private limited company difficult, then it’s better to shift to the LLP format. But how can you convert your private limited company and obtain LLP registration online? Find out here!

Steps for Converting a Private Limited Company to an LLP

Following are the steps to convert your private limited company to an LLP in India:

  • Step-1: Obtain DIN: Director Identification Number (DIN) or Designated Partner Identification Number (DPIN) is mandatory for LLP incorporation. As this is the case of conversion, therefore, all the directors who are the prospective partners in LLP would already be possessing DIN. In case there are partners who do not possess DIN, then firstly, they need to obtain the same.
  • Step-2: Conduct a Board Meeting: The board of directors should hold a board meeting for consideration and approval of the proposal for conversion of the private limited company to LLP.
  • Step-3: Application for Name Availability: Once the board resolution is passed, the process for conversion begins. The company shall check the name availability for LLP by using the Form RUN-LLP.
  • Step-4: Filing of the Application Form: After the company checks for the name availability, it shall file Form FiLLiP and Form-18 for conversion of the company into LLP.
  • Step-5: Filing of the Incorporation Documents: The applicant shall also be required to submit the incorporation documents as referred to in Section 11 by filing Form-2. 
  • Step-6: Certificate of Incorporation of LLP: Once all the documents are filed and approved, the registrar shall scrutinise the same. In case the registrar is satisfied with the submissions, then it shall issue the certificate of incorporation of LLP. 
  • Step-7: Filing of LLP Agreement: Once LLP incorporation is completed, the applicant shall file the LLP agreement entered between the partners. The LLP agreement shall be filed within 30 days of LLP incorporation.
  • Step-8: Within 15 days after the date of LLP registration, the applicant shall intimate the registrar of companies with which it was registered about the conversion of the company into LLP by filing Form-14.

Documents Required for Conversion into LLP

For converting your private limited company to LLP in India, you will require the following documents:

  • Consent of the shareholders of the company
  • Consent of the creditors of the company
  • Incorporation documents in Form-2
  • Board resolution
  • LLP Agreement
  • No objection certificate from the tax authorities
  • Statement of affairs of the company
  • Application and declaration of incorporation of LLP
  • Any other document as may be required

Benefits of an LLP

Limited liability partnership registration confers multiple benefits to the business persons making it a preferred format of the constitution. Following are some of the prominent benefits that you can avail of through LLP company registration:

  • Lesser Compliances: LLPs involve much lesser compliances as compared to the companies. It directly reduces the cost of operating the business.
  • Limited Liability: As the name suggests, LLP limits the liability of its partners akin to the companies. This is one of the biggest advantages that the LLPs have over partnership and proprietorship firms.
  • End Number of Partners: LLPs shall have a minimum of 2 partners. However, there is no limit as to the maximum number of partners that an LLP can have. This opens the door for the exponential growth of the firm.
  • Separate Legal Identity: LLPs have a separate legal identity from their partners. Thus, LLPs can buy properties and borrow money in their own name, sue and be sued. It enjoys all the benefits that a person can legally enjoy.
  • Perpetual Succession: Due to separate legal identities, LLPs enjoy the benefit of perpetual succession. Thus, it enjoys continued existence until it is legally dissolved.

Conversion of a private limited company to an LLP is also exempted from tax that otherwise would have been subject to capital gains. However, certain conditions need to be fulfilled before availing of such exemption. If you are looking for converting your private limited company into LLP, then contact your eAuditors now!

Author : Dipen

Date     : 23-Jul-2022