LLP into a Private Limited Company: All you need to know

Last Updated at: February 11, 2020
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LLP into a Private Limited Company_ All you need to know

Running a business nowadays is not just limited to a region or country, but is being presented in the Global Market. Indeed, the trade barriers are being removed and the businesses and companies are becoming unified, growing, and expanding worldwide.

Limited Liability Partnership (LLP):

Under the LLP Act, 2008, a Limited Liability Partnership was introduced. The registrations for LLP in India began in the year 2010, and according to the statistics, the registrations for LLP increased by over 55% in the financial year 2014-15, while registrations decreased for the Private Limited Companies.

Many businesses and companies registered under the LLP are now willing to convert into a Private Limited Company due to the growth in their business and also due to the benefits of Pvt. Ltd. Companies.

The LLP can be converted into the Pvt. Ltd. Companies under provisions made in Section 366 of Companies Act, 2013 and also Companies Rules, 2014.

Converting Limited Liability Partnership into Private Limited Companies:

There are certain conditions and requirements that need to be satisfied in order to convert LLP to Pvt. Ltd. Companies. These are as follows:

  • The LLP must have a minimum of 7 partners.
  • All the partners must approve for converting the company or firm.
  • The advertisement needs to be done in local and national newspapers.
  • The ROC where the LLP is registered must provide a no-objection certificate (NOC).

Once all the above-mentioned requirements are satisfied, the incorporation process comes into action. The incorporation process is as follows:

  • Approval of name has to be obtained from the ROC (Registrar of Companies) by submitting an application online. In order to apply for the name, one needs to choose from the items mentioned in INC Form-1. Once accepted, the name has a validity of 60 days.
  • The Digital Signature Certificate (DSC) and the Digital Identification Number (DIN) must be obtained for all the 7 members of the company. 
    • To obtain the DIN, the application has to be filed on the portal of the Ministry of   Corporate Affairs (MCA).
    • The application is processed and further approved by the MCA ( Ministry of Corporate Affairs).
    • All the documents must be submitted according to the requirements.

  • Filing Form No. URC-1:

    Once the name gets approved from the Registrar of Companies, one needs to file in Form-1 along with the following documents:

    • The details of all the members, namely, address, name, DIN, passport number, etc.
    • The list of the first directors of the company along with their details as well.
    • An affidavit from all the First Directors stating that they are not banned to be the director under Section-164. All the documents so filed must be complete, correct and the information provided must be true.
    • A list that includes the names and addresses of all the partners under LLP, along with a copy of the LLP. 
    • A statement that indicates the following:
      • The number of shares of the company and the ratio into which they are divided.
      • Number of shares that are taken and the amount involved in every share.
      • The name of the firm has to be provided along with the addition of limited or Pvt. Ltd.
    • A no-objection certificate from all creditors.
    • The statement of accounts of the company and copy of the newspaper advertisement.
  • Memorandum of Association and Articles of Association:

    Once the name is approved and the form-1 is sanctioned from the ROC, Memorandum of Association (MoA) and Articles of Association (AoA) are to be formulated.

Once all the above steps are completed, the Liability Limited Partnership can be converted to a Private Limited Company.

Which is Better? LLP or Private Limited Company?

LLP is the preferred option in the case of small businesses and companies whose turnover is less than Rs.40 lacs annually and also the capital contribution is below Rs. 25 lacs. LLP that satisfies these conditions do not need any annual audits. Whereas, in the case of Private Limited Companies, the audit of the financial statements has to be submitted irrespective of the turnover of the company. 

Register for Your Pvt. Ltd. company

As such, in the case of small and growing businesses, the LLP has an upper edge over the Private Limited Companies. But, if the turnover is more than 40 lacs annually, Pvt. Ltd. Companies are preferred and are better because:

  • The LLP only has the concept of partners and not shareholders, as such, all the owners are the partners. However, this concept does not attract the Venture Capitalists and the Investors, making LLP a big no for major companies involved in the long term growth.

Conclusion:

It is solely the choice of the individuals or partners in the business and also, the growth and turnover of the business by which one can decide whether it is good for LLP or Private Limited Company. 

 

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LLP into a Private Limited Company: All you need to know

980

Running a business nowadays is not just limited to a region or country, but is being presented in the Global Market. Indeed, the trade barriers are being removed and the businesses and companies are becoming unified, growing, and expanding worldwide.

Limited Liability Partnership (LLP):

Under the LLP Act, 2008, a Limited Liability Partnership was introduced. The registrations for LLP in India began in the year 2010, and according to the statistics, the registrations for LLP increased by over 55% in the financial year 2014-15, while registrations decreased for the Private Limited Companies.

Many businesses and companies registered under the LLP are now willing to convert into a Private Limited Company due to the growth in their business and also due to the benefits of Pvt. Ltd. Companies.

The LLP can be converted into the Pvt. Ltd. Companies under provisions made in Section 366 of Companies Act, 2013 and also Companies Rules, 2014.

Converting Limited Liability Partnership into Private Limited Companies:

There are certain conditions and requirements that need to be satisfied in order to convert LLP to Pvt. Ltd. Companies. These are as follows:

  • The LLP must have a minimum of 7 partners.
  • All the partners must approve for converting the company or firm.
  • The advertisement needs to be done in local and national newspapers.
  • The ROC where the LLP is registered must provide a no-objection certificate (NOC).

Once all the above-mentioned requirements are satisfied, the incorporation process comes into action. The incorporation process is as follows:

  • Approval of name has to be obtained from the ROC (Registrar of Companies) by submitting an application online. In order to apply for the name, one needs to choose from the items mentioned in INC Form-1. Once accepted, the name has a validity of 60 days.
  • The Digital Signature Certificate (DSC) and the Digital Identification Number (DIN) must be obtained for all the 7 members of the company. 
    • To obtain the DIN, the application has to be filed on the portal of the Ministry of   Corporate Affairs (MCA).
    • The application is processed and further approved by the MCA ( Ministry of Corporate Affairs).
    • All the documents must be submitted according to the requirements.

  • Filing Form No. URC-1:

    Once the name gets approved from the Registrar of Companies, one needs to file in Form-1 along with the following documents:

    • The details of all the members, namely, address, name, DIN, passport number, etc.
    • The list of the first directors of the company along with their details as well.
    • An affidavit from all the First Directors stating that they are not banned to be the director under Section-164. All the documents so filed must be complete, correct and the information provided must be true.
    • A list that includes the names and addresses of all the partners under LLP, along with a copy of the LLP. 
    • A statement that indicates the following:
      • The number of shares of the company and the ratio into which they are divided.
      • Number of shares that are taken and the amount involved in every share.
      • The name of the firm has to be provided along with the addition of limited or Pvt. Ltd.
    • A no-objection certificate from all creditors.
    • The statement of accounts of the company and copy of the newspaper advertisement.
  • Memorandum of Association and Articles of Association:

    Once the name is approved and the form-1 is sanctioned from the ROC, Memorandum of Association (MoA) and Articles of Association (AoA) are to be formulated.

Once all the above steps are completed, the Liability Limited Partnership can be converted to a Private Limited Company.

Which is Better? LLP or Private Limited Company?

LLP is the preferred option in the case of small businesses and companies whose turnover is less than Rs.40 lacs annually and also the capital contribution is below Rs. 25 lacs. LLP that satisfies these conditions do not need any annual audits. Whereas, in the case of Private Limited Companies, the audit of the financial statements has to be submitted irrespective of the turnover of the company. 

Register for Your Pvt. Ltd. company

As such, in the case of small and growing businesses, the LLP has an upper edge over the Private Limited Companies. But, if the turnover is more than 40 lacs annually, Pvt. Ltd. Companies are preferred and are better because:

  • The LLP only has the concept of partners and not shareholders, as such, all the owners are the partners. However, this concept does not attract the Venture Capitalists and the Investors, making LLP a big no for major companies involved in the long term growth.

Conclusion:

It is solely the choice of the individuals or partners in the business and also, the growth and turnover of the business by which one can decide whether it is good for LLP or Private Limited Company. 

 

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