Want to expand and grow your business registered as an LLP? You might want to convert it into a private limited company to make that happen. Get to know more about the same in detail here.
A limited liability partnership is a relatively new business structure that was introduced under the LLP Act, 2008. The registrations for LLP in India began in the year 2010, and according to the statistics, the registrations for LLPs increased by over 55% in the financial year 2014-15, while registrations decreased for private limited companies. While the LLP is a low-barrier method of entering into a business, in the long run, having a private limited company is much more beneficial, especially if you plan to expand your business and get investors for the same. So, many businesses and companies registered under the LLP ACT are now looking to get the process for conversion of LLP to pvt ltd due to the growth in their business and also due to the benefits of a private limited company.
An LLP can be converted into a Pvt ltd company according to Section 366 of Companies Act, 2013 and also Companies Rules, 2014.
Process of Conversion of LLP Into a Private Limited Company
The Process of conversion of LLP to pvt ltd involves filing the necessary forms with the Registrar of Companies and obtaining approval for the conversion. Some certain conditions and requirements need to be satisfied in order to convert Limited Liability Partnership to a private limited company. These are as follows:
- The LLP must have a minimum of 2 partners
- All the partners must approve for converting the company or firm
- An 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 partners of the LLP.
- 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 by the Registrar of Companies, one needs to file Form-1 along with the following documents:
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- 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
- The 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.
Reasons for Conversion of LLP to Pvt ltd Company
The conversion of a Limited Liability Partnership (LLP) into a Private Limited Company may be prompted by the desire to access greater funding options, as Private Limited Companies often find it easier to attract investments and loans. Additionally, the shift may be driven by the need for a more hierarchical management structure, as Private Limited Companies typically have a well-defined board of directors, offering a clearer decision-making framework compared to the more flexible structure of an LLP.
- An LLP registration converts to a Private Limited company primarily for business growth and expansion
- LLPs, limited in attracting investments, convert to Pvt Ltd to access a broader range of funding options, including foreign and equity funding
- Conversion facilitates the issuance of equity share capital, expanding financial avenues for the business
- The conversion helps in avoiding capital gains tax and provides advantages in carrying forward unabsorbed losses and depreciation from the previous year
- LLP to Pvt Ltd conversion allows continuity in brand name and goodwill, enabling the utilization of existing reputation for further growth.
Conditions for Conversion of LLP into Pvt Ltd Company
The conversion of LLP to pvt ltd Company is subject to certain conditions stipulated by regulatory authorities. Typically, these conditions include obtaining approval from the majority of partners, ensuring compliance with the Companies Act of 2013 and other applicable laws, and settling. Here is a complete outline for the same:
- Consent from all designated partners is mandatory for the LLP’s conversion to Pvt Ltd
- The LLP should have completed all necessary filings, including annual returns and financial conversion statements, up to the statutory date
- No pending documents, regulatory or statutory filings, or unresolved proceedings should be associated with the LLP
- The LLP must be free from outstanding debts or liabilities that might impede the conversion process
- All necessary approvals and licenses for the LLP’s business operations must be obtained
- The proposed name for the new Private Limited Company should not resemble that of any existing Company or LLP
- Compliance with all applicable laws and regulations under the Companies Act, 2013, is essential for the conversion.
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 to register as an LLP: or a private limited company. For more legal information, visit Vakilsearch.
FAQs on Conversion of LLP to Pvt ltd
Can LLP be converted to Pvt Ltd with the same name?
Yes, Converting an LLP into a Private Limited company allows for retaining the same brand name, enabling the utilization of existing brand recognition and goodwill for further business growth.
What is the fee for conversion of LLP to Pvt Ltd?
It totally depends on the process. For more information get in touch with our experts
What is the limit for LLP conversion to Pvt Ltd?
The combined sales, gross receipts, and turnover in any of the three years before the conversion date should not surpass ₹60 Lakhs.
