In India, there are many ways in which you can convert any partnership firm into a full-scale LLP. Certain processes must be followed, and major documentation must be submitted to procure the correct document for the formation of the LLP. You need to clearly mention the number of partners, the legal entities, and the exact targets of the LLP before you finalise the papers.
Overview:
If you want to know how to physically to Convert a Partnership Firm Into LLP, first and foremost, you need to know the type of partnership you have. In India, there are multiple provisions through which any type of partnership can become an LLP. Much paperwork needs to be done; all the directors’ names, designations, addresses and affiliations need to be given.
Several reasons for which any partnership can be converted into an LLP. If it wants to be a separate legal entity, if there are too many directors and members, if there are few important liabilities that can only be fulfilled by forming an LLP, then it is better to go for an LLP. In this blog you’ll know whether you have to present physically to convert a partnership firm Into LLP.
Steps To Be Followed for The Formation Of An LLP
If you are interested in physically to convert a partnership firm Into LLP, then you can go through the following points in detail:
-
There are specific basic requirements like a minimum of two partners, there should be DPIN, and one of the designated partners must be an Indian citizen. To add, there is a need for consent from all unsecured creditors. Each of the members should contribute to the formation of the LLP, similar to the requirements when you register a company.
- Gone are those days when you had to be present physically to ratify the working of LLP. There are reliable online methods that can prove to be beneficial for you. In the first step, the digital signature certificate should be presented and it should be uploaded. After this, you need to get a DPIN or a Designated Partner Identification Number. You should have at least two important partners if you want to convert the partnership to an LLP.
- The third step includes naming the LLP or choosing the name for the LLP. This name, after selection, has to be presented to the Ministry of Corporate Affairs for official approval of the name. It should be a unique name, and there should be a reference mention of the phrase limited liability partnership.
- By the time you go for the fourth step, you get the name approval, and then you have to fill in all the details in form 17, check and fill up the incorporation application and then fill up all the details in the subscriber’s sheet.
- Additionally, when you want to convert a partnership into an LLP, you need to submit major documents like the latest and updated income tax papers, all returns, and a checking account of liabilities and assets as ratified by experienced chartered accountants of the country. You should also procure a statement of consent from all the partners of the partnership firm, then provide the list of creditors who are part of the firm. After this, you should also look at a proper ‘No Objection Certificate’ from major tax authorities.
- When you Conversion of Partnership Firm into LLP, the next few steps should include the perfect approval of all the major partners, all the paperwork of the subscribers, the detailed registration address etc.
- When you complete all the documents successfully and submit the required fee, the registration process takes another 15-20 days. You can also get the certificate of conversion once the registrar finishes all the formalities of verifying the major documents.
- There are major differences between a partnership firm and an LLP. This can extend to liability, number of members, accounts, digital signature online, reference to the membership of the partnership firm etc. All these differences should be taken care of before you start submitting the documents for the conversion process.
Certain mandatory things need to be done when the conversion takes place. Section 55 of the Limited Liability Partnership Act, which came into force in 2008, is an important Act in this direction. All the partners who are at present, the partnership firm members, can be added to the LLP agreement with each of their signature uploads.
While the application is still in process or submitted, there cannot be a sudden withdrawal of the partners, nor can there be any sudden inclusion of the partners. The valid digital signature should be there, and the partnership firm which needs to get converted must be registered under the Partnership Act of 1932. All the partners should consent to the entire conversion from the partnership firm to the LLP. If any kind of removal of a partner is needed, then it can only be done after the conversion is completed.
To add, there is also another point that is to be noted. The Director Identification Number or DIN or the Designated Partner Identification Number or DPIN must be included for a successful conversion process. All the rules applicable for an LLP apply to all the partners who are part of the firm.
FAQs
Can I convert my partnership firm to LLP?
Yes, a partnership firm can be converted to an LLP by following the prescribed procedure and fulfilling the necessary requirements.
What are the fees for the conversion of a partnership firm to an LLP?
The fees for conversion of a partnership firm to an LLP depend on the contribution of the LLP, professional fees, notary charges and so on. To get a transparent and affordable estimate, get in touch with our experts at Vakilsearch.
What are the benefits of converting a partnership firm to an LLP?
The benefits of converting a partnership firm to an LLP include limited liability protection, separate legal entity status, perpetual existence, and ease of ownership transfer.
What are the tax implications of the conversion of a partnership firm into an LLP?
The conversion of a partnership firm into LLP is not considered as a transfer of capital assets and is not subject to capital gains tax.
What are the disadvantages of converting a partnership into an LLP?
The disadvantages of converting a partnership into an LLP include higher compliance requirements, increased cost of compliance, and restrictions on raising capital.
Can LLP partners take a salary?
Yes, LLP partners can take a salary as per the LLP agreement, subject to the maximum limit prescribed under the Income Tax Act. The salary paid to partners is taxable as per the income tax slab rates applicable to individuals.
Conclusion
Any LLP formation requires a huge list of papers and several rules to be implemented before the company actually starts functioning. All the directors and the body’s members should have proper roles and responsibilities to contribute to the scaling of the LLP in the long run. Limited partnerships, liabilities etc. should be considered before you go for any LLP formation.
Now, you can start searching for the best-established LLPs with a target reach, stakeholders, and customers that have been formed due to a converted partnership. Vakilsearch is one such reliable portal from where you can get the best ideas about how to convert a partnership into an LLP. It is a one-stop destination where you get sound advice, online support and guidance about the company, taxation, company registration and formation and legal aspects of any company. If you are an entrepreneur, you can select some of the most lucrative businesses, but you must have the proper papers to convert your business into an LLP. Check out Vakilsearch and get the right solution to all your queries.
