Conversion of Firms to LLP/Company

Converting a traditional partnership firm into a Limited Liability Partnership (LLP) or Private Limited Company offers a modern structure, limited liability, and a professional edge. This transition not only enhances credibility but also facilitates scalability and compliance with statutory requirements. Apnaa Filing provides expert guidance and hassle-free services for seamless conversion.

1. Benefits of Conversion

  • Limited Liability: In an LLP or company, the liability of partners or shareholders is limited to their investment.
  • Perpetual Existence: Unlike a partnership firm, an LLP or company enjoys uninterrupted existence.
  • Enhanced Credibility: LLPs and companies are more recognized entities, attracting clients and investors.
  • Ease of Ownership Transfer: LLPs and companies allow ownership transfer via share or partnership transfer mechanisms.
  • Separate Legal Entity: Both LLPs and companies are distinct legal entities, separate from their partners or directors.

2. Key Differences Between LLP and Company

Aspect LLP Private Limited Company
Liability Limited to the extent of contribution. Limited to the extent of shares held.
Taxation Taxed as a partnership. Taxed as a corporate entity.
Compliance Moderate compliance. High compliance requirements.
Ownership Transfer Requires amendment in partnership deed. Transfer of shares.

3. Requirements for Conversion

For Conversion to LLP:

  • Consent of all partners.
  • Existing firm must not have more than 20 partners.
  • No security interest on firm assets subsisting at the time of application.

For Conversion to Company:

  • Consent of partners/shareholders.
  • Minimum of 2 directors (for a private limited company).
  • Digital Signature Certificate (DSC) and Director Identification Number (DIN) for directors.

4. Documents Required

For Conversion to LLP:

  • Consent of all partners.
  • Latest financial statements of the firm.
  • Partnership deed.
  • Partners' identity proof (PAN, Aadhaar).
  • Proof of firm address (utility bills, rental agreement, or ownership documents).

For Conversion to Company:

  • Partnership deed and resolution for conversion.
  • Identity proof of partners (PAN, Aadhaar, etc.).
  • Address proof of firm and partners.
  • MOA and AOA for the new company.
  • DSC and DIN for directors.

5. Step-by-Step Process

Conversion to LLP:

  1. Name Reservation: Apply for name reservation for the LLP using the “RUN-LLP” service on the MCA portal.
  2. Filing Form 17: Submit Form 17 along with required documents for conversion of the firm into an LLP.
  3. Filing Form FiLLiP: File the incorporation application (FiLLiP) for LLP registration.
  4. Certificate of Incorporation: Upon approval, receive the Certificate of Incorporation and start operations as an LLP.

Conversion to Company:

  1. Name Reservation: Submit the proposed name through the SPICe+ service on the MCA portal.
  2. Drafting MOA and AOA: Prepare the Memorandum and Articles of Association.
  3. Filing Form URC-1: File the conversion application using Form URC-1 along with required documents.
  4. Certificate of Incorporation: Obtain the Certificate of Incorporation from the Registrar of Companies.

6. Key Points to Remember

  • Continuity of Business: Conversion retains the business's previous liabilities, assets, and operations.
  • Legal Compliances: Post-conversion, comply with all LLP or company-related statutory requirements.
  • Timeframe: The process usually takes 15-20 business days, depending on documentation and approvals.

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