Company IncorporationLLP

Is It Possible to Convert a Partnership Firm into an LLP with the Same Gstin?

If you plan to convert a partnership firm to an LLP, then there are certain things that you have to keep in mind. Read on to know more about it!

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Partnership firms are governed by the provisions of the Income Tax Act 1961. However, if you wish to convert them into Limited Liability Partnerships (LLPs) under Section 44AB of the IT Act 1961, then you must follow some specific procedures. In this blog, you shall see how it is possible to convert a partnership firm into an LLP with the same GSTIN?

Is It Possible to Convert a Partnership Firm Into an LLP with the Same Gstin: Introduction

To answer your query, is it possible to convert a partnership firm into an LLP with the same GSTIN? Let us understand first that limited liability partnerships are becoming more common. In recent years, they have offered more flexibility and other types of organisations (such as unlimited partners). LLPs have become a popular option because of the liability limits associated with them. This can be a relief from the risk of personal assets that businesses cannot handle on their own.

The limited liability partnership (LLP) form of business has many advantages compared to the traditional partnership, including limited liability and perpetual succession. These factors make it a feasible option for converting a traditional partnership into an LLP.

CONVERT PARTNERSHIP INTO LLP

Key Differences Between an LLP and a Partnership Company

Limited Liability Partnership (LLP):

  • Has a separate legal entity
  • Liability is limited to the investment
  • Follows a corporate structure and prepares books of account
  • No maximum partners limit
  • DSC is issued to all the partners.

Partnership:

  • Does not have a separate legal entity
  • Liability is unlimited and can extend up to personal assets
  • No mandatory structure 
  • Limited to a maximum of 20 partners
  • No DSC requirement.

Why Choose LLP Over Partnership Company?

1. The flexibility of ownership:

There are many advantages to a limited liability partnership over a partnership firm. A limited liability partnership shares the liability equally among the partners. This means that all of the partners are able to take advantage of running their business without having to worry about going out of business or losing money on each transaction. Also, partnerships have limitations on how much management control each partner can exercise over the company. For instance, in some cases, one partner could be restricted from transferring ownership of the company because they hold more than half of the voting rights.

2. The convenience of succession:

A perpetual succession refers to a process where one business is passed down through generations. LLP has the ability to keep a business intact and continuing, while partners in partnerships are only around for the length of their contract.

3. The ease of investment:

As an investment, the LLPs are more likely to attract investors, which increases the chances of a successful deal. Additionally, it is much easier for VCs to conduct business with LLP with its corporate structure than with a partnership firm.

Conversion of Partnership to LLP

In the goods and services tax (GST) act under schedule II, it’s specified that, while a partnership is being converted into an LLP, the transfer of stocks or any other additional assets are exempted, as these are usually used to continue the same business. This is available and applicable when the existing organisation ceases to be a taxable entity even after the conversion. Alongside the asset transfer, the transfer of a going concern is also exempted as per the CGST notification released in 2017, and it’s not taxable under GST.  

The GST in India is based on the PAN of the applicant for GST registration. LLP, being a separate legal entity from the existing partnership firm, will have a different PAN card, and hence it is required to register the GST separately. The applicant must have a PAN to get GSTIN, and as the applicant’s PAN is changed, they must get a brand new registration. While converting a partnership firm into an LLP, the applicant must apply for new registration as the PAN details change after cancelling the old registration. 

For a new GST registration for LLP, the applicant must submit the LLP agreement along with the new LLP pan card and the details of the partners supported with a passport size photo and Aadhar card partners for the proof of address and identity. The applicant must ensure that all the documents should be self-attested by the partners. For the address proof, the applicants could submit the latest electricity or any other utility bill in the owner’s name and a NOC from the owner. Remember, the utility bills submitted must not be older than one month.

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