Limited liability partnerships are popular because of the multiple benefits of a mix of companies and partnerships. LLP offers corporate benefits and partnership flexibility. A limited liability partnership is a legal entity with the limited liability of a partner. LLPs can sign contracts and own real estate in their own name. Each shareholder must submit a declaration and consent to convert the company to an LLP along with the application.
Documents required to convert a company to LLP
The following documents must be attached to the application for converting to an LLP.
The consent of each shareholder of the company to convert the company to LLP in the specified format.
Form 2 Incorporation document.
Form 3 application and LLP Incorporation Declaration. Customs clearance certificate from the tax office. Statement of company assets and liabilities.
A list of all creditors with consent. Approval from other countries. The power of lawyers to make statements. Optional attachment (if any).
Effect of conversion
Following are some of the implications of converting a limited liability company to an LLP.
- Another partnership is formed.
- The name of the limited liability company will be removed from the register of the registrar of the Company.
- At the time of conversion, all property, assets, interests, rights, privileges, liabilities, and obligations of the limited liability company shall be passed to the LLP.
- The conversion does not affect existing liabilities, obligations, agreements, contracts, and continued employment.
- Permits or licenses granted to a limited liability company under underwritten law and valid prior to the conversion date will not be automatically assigned to the limited liability company. The terms of the license are decisive here. Therefore, in most cases, you will need to obtain a new GST or FSSAI registration from the organizer.
Governance and benefits
Limited Partnerships are governed by the Limited Partnership Act of 2008. This law was drafted primarily to encourage small businesses. Limited liability companies are given several advantages in continuing this goal.
- More scope of autonomy
- Less form of compliance is required for LLPs compared to other companies
- There is no limit fixed on the number of partners
- There is no statutory minimum number of partner meetings
- LLP requires more generous statutory records management requirements
- MAT does not apply to LLP
- LLP auditing is not mandatory
Companies that cannot convert to LLP
All companies operating in the banking, finance, and insurance sectors
All companies have secured/asset-secured loans
In addition, all foreign direct investment companies apply the conditions related to the operation
All companies with external commercial loans
All FDI companies follow the approval route.
Procedure for the Conversion of a Company Into an LLP
Step 1: Get the DIN (Director Identification Number).
For designated partners who do not yet own DIN.
Step 2: Board meeting should be held to consider the conversion plan. In order to convert a company to an LLP, a resolution of the board of directors must be passed and the directors must approve the application for the name of the LLP.
Step 3. Next, you need to book the name of the LLP and get a certificate of approval from the Registrar of Company
Step 4: Submit the e-Form and then complete it in ROC with the following document
Proof of LLP office address
Consent of the nominated partner
Proof of identity for all partners
Certificate of residence for all named partners and partners
Details of other companies with which LLP partners are partners
Step 5: Form 18 is a form for converting a company to an LLP. But it must be filed with a form to the company itself.
Form 18 must contain the following information
Consent of the company’s shareholders to convert it to an LLP
Updated tax return
Latest balance sheet and annual reports filed with MCA
Any court decision or order against or against the company
If there is a secured interest in the company’s assets
In addition, if the existing shareholders are partners of the planned LLP
If the ROC rejects a previous conversion request
Also, a list of secured creditors who have agreed to the conversion
Statement of company accounts verified by an independent auditor
Statement of the company’s shareholders
Step 6 – Draft LLP Agreement
Once incorporated, the nominated partners must establish an LLP agreement that must include the following information:
Name of LLP
Names of all partners and designated partners
Rights and obligations of general partners
Step 7: EForm3 and EForm14 files
Two forms namely Form 3 and Form 14 will be submitted in the next step.
EForm3 contains data related to the LLP agreement. This form must be submitted within 30 days of your business becoming an LLP, attach the LLP agreement to the form.
EForm14 is used to notify the commercial register that the company has been converted to a limited liability company. This form must be submitted within 15 days of conversion. Finally, in addition to Form 14, you need to enclose the following documents:
- A copy of the corporate establishment certificate
- Copy of FiLLiPe-form
The LLP must notify the registrar that the company has been converted to an LLP within 15 days of the conversion date. The intimation must be edited on Form 14. The registrar will issue a registration certificate after completing the required procedures. If the registrar refuses the conversion, the limited liability company may appeal to the court.
If the property is registered in the name of the company, the LLP must notify these authorities of the details of the conversion, along with the details of the LLP.