Have you recently converted your partnership firm into an LLP or are you looking to convert it?, then it's the right time to learn the effect of conversion on an LLP converted from a partnership.
A partnership company may be converted into an LLP based on Section 55 of the LLP Act, 2008. This adaptation can prove to be much more beneficial to the partnership companies. The members attain a legal entity status, and the firm can adopt more partners.
The conversion of a partnership firm into an LLP has some effects on the functioning of the firm. Some of the important effects of Conversion on an LLP from a Partnership are discussed below.
Effect of Conversion of Partnership Firm to LLP
Some common effects of Conversion on an LLP from a Partnership are as follows.
Transfer of Licenses, Registrations, and Property
- Licenses, authorisations, permissions, or registrations published in the name of the partnership company will not be transferred to the LLP
- The other assets that have been registered under the partnership company before the conversion, have to be transferred to the LLP after getting permission from the administrators.
- As per paragraph 9 of the second schedule of the LLP Act, all the proceedings by or against the company pending before any court will be passed onto the LLP.
Section 58 (4) of the LLP Specifies that after the date of registration, It is assumed that an LLP with the name given on the registration certificate exists partnership’s assets, liabilities, rights, privileges, and obligations are considered to be wholly owned by the LLP and the conversion shall not affect existing contracts, employment, and arrangements
Partners enjoy limited liability protection for all transactions performed after the partnership has been converted to an LLP. However, the partner is personally responsible for all business conducted prior to the Conversion of Partnership Firm into LLP.
One of the main effects of conversion on an LLP from a partnership is that the LLP becomes a separate legal entity from its owners.
Members Are Responsible for Pre-conversion Company Debts
As per Section 16 (1) of schedule 2 of the LLP Act, nevertheless, each member of the company that is converted to LLP, Its transformation happened before or the result of a contract signed before the conversion stands liable for all the pre-conversion debts. They have to take responsibility for debts and settle them, the LLP in any way will not be liable for the debt.
Procedure for the Conversion of Partnership to LLC
The procedure for the effects of Conversion on an LLP from a Partnership includes the following steps.
Step 1: Apply for Director Identification Number (DIN)
- If there are only two designated partners, DIN can be obtained along with the Form for Incorporation for Limited Liability Partnership (FiLLiP)
- If there are more than two designated partners, then the DIN is applied to all the partners individually.
Step 2: Apply for Name Approval
Login to the Ministry of Corporate Affairs (MCA) website
- The petitioners have to login into their accounts on MCA Website
- Click the ‘Run’ icon in the MCA service to access an online form
- Fill out the form and upload the PDF documents
- If the applicant needs to load any list of documents, it can be uploaded here.
Submission of Form on MCA Website
After fulfilling the above steps, the user should submit the form on the MCA website.
(C) Payment of Fees
- There is no choice of spending overdue challan in the RUN option
- The petitioner has to pay the fees shortly after loading the form
- After the payment, a challan will be created.
(D) Validity of Reserved Name
Reserved names shall be valid for 90 days from the date of name registration.
Step 3: Apply for Digital Signature Certificates (DSC)
Buying Digital Signature Certificate for designated partners is mandatory. It is used for digital authentication of the incorporation papers. You can use only the digital signatures published to you. It is illegal to use the signatures of others.
The effects of Conversion on an LLP from a Partnership can result in significant changes to the legal structure of the business entity.
Step 4: Filling of Form With Registrar Of Companies (ROC)
- Statement of the consent of all partners, of all unsecured creditors along with their approval to modify the statement of possession & liabilities of the firm has to be duly certified by a CA
- Permission from any other administration may be expected to declare for part B of form 17 by designated partners
- A copy of the acknowledgment of the income tax return should be presented.
Step 5: Issue of Certificate of Registration of LLP
- Section 58(1) of the LLP Act states that the registrar, a company that has accepted the requirement of the second schedule, shall be accountable to the requirements of the Limited Liability Partnership Act and the rules made under it
- Now the registrar checks the petition and makes sure it obliges the rules and then provides a certificate of registration.
Step 6: Draft LLP Agreement
The agreement should contain all the following data
- Name of LLP
- Name of partners & designated partners
- Form of subsidy
- Revenue sharing ratio
- Liberties & duties of partners
- Recommended business
- Laws for governing the LLP.
Step 7: Filling of E-form LLP-3
This application provides information about the LLP agreement signed between the partners.
Step 8: Intimate the Registrar of Companies
- As per Section 5 of the second schedule, the LLP shall be passed within 15 days from the period of registration
- Notify the ROC with which it was enrolled under the regulations of the Indian Partnership Act, 1932, about the transformation and the details of the LLP
- It should have the document of the certificate of incorporation of LLP
- Document of incorporation is fulfilled in FiLLiP.
Conclusion
Thus, you might have got to know about the effects of Conversion on an LLP from a Partnership. Doesn’t this whole process seem very complicated? Yes, indeed it is very complex. However, you can reach out to our experts at Vakilsearch they will help you to register your LLC in India. Our excellent team of attorneys will complete the LLC registration process in just three steps. Initially, they will get in touch with you to collect all the required information and initiate the process. Reach out to us right now to get your LLC registered. Overall, the effects of Conversion on an LLP from a Partnership can result in increased credibility, limited liability protection, simpler compliance, and greater flexibility for the partners
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