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Home / GST Filing
Conversion from Partnership to LLP
"GST registration is essential for legal business operations and unlocking tax benefits."
Conversion from Partnership to LLP
In recent years, Limited Liability Partnerships (LLPs) have become more popular than ordinary partnerships. This is because limited liability partnerships (LLPs) provide greater flexibility, limitless partners, and other benefits. However, the main reason for the change is that limited liability partnerships (LLPs) provide a significant benefit. Because LLPs are a mix of a private limited company and a partnership, they relieve the burden on the partner's personal assets. This kind of organizational structure is ideal for small and medium-sized organizations. Compared to a typical partnership, the Limited Liability Partnership (LLP) has more benefits. The main reasons a partnership firm might want to become an LLP are limited liability, perpetual succession, and limitless partners.
Major differences between LLP and Partnership firm
| PARTICULAR | LLP | PARTNERSHIP |
|---|---|---|
| Management approach | Because the Limited Liability Partnership Act of 2008 allows for flexible LLP Agreement drafting, LLP partners have a great deal of autonomy in their daily operations. | Partnership firm have less flexibility in how they handle day-to-day operations and a more inflexible organizational structure. |
| Perpetual succession | Due to its capacity to operate as a distinct legal entity, LLP operations are unaffected by the death or departure of a partner, guaranteeing continuity. | When a partner leaves or dies, partnership firms experience operational disturbances that affect the stability and succession of the company. |
| More Investments | Because of their structured form, which is similar to that of body corporates, limited liability partnerships (LLPs) draw in venture capitalists and international investors, fostering an environment that is favourable to investment. | Partnership firm may have trouble drawing in overseas investment since its structure can be seen as more conventional and disorganized. |
| Networking | In order to achieve a variety of commercial objectives, LLPs promote a multidisciplinary approach by facilitating collaboration between individuals from other professions. | The variety of objectives that partnership firms can successfully pursue may be constrained by their inability to readily collaborate across specialties. |
| Liability | Limited liability shields personal assets from business debts for LLP partners. | Partners in partnership firms risk their own assets to pay off business obligations, and they are subject to unlimited responsibility. |
Why LLP is more beneficial
In addition to the main differences, the following characteristics make an LLP a better choice than a typical partnership firm:
i) Flexibility and Management Freedom: The partners are granted a good amount of liberty in managing the day-to-day operations and affairs of the limited liability partnership. Because the Limited Liability Partnership Act of 2008 has little bearing on LLP agreements, the Act allows for a greater degree of flexibility in the drafting of these agreements.
ii)Perpetual Succession: In contrast to a regular partnership, an LLP remains in existence even after a partner dies . The LLP is able to conduct business because of its distinct legal entity feature.
iii) Investment Attraction: Because LLPs are more organized and have a corporate structure than ordinary partnerships, they are viewed as an investment possibility by venture capital funds and foreign investors.
iv)Multidisciplinary LLPs: One unique characteristic and benefit of an LLP is the ability for professionals from different disciplines to collaborate.
Prerequisites for converting Partnership into LLP
i) A partnership firm must convert to an LLP in accordance with Section 55 of the Limited Liability Partnership Act of 2008, as well as Schedule II of the Act.
ii) All of the firm's partners must also be partners in the LLP; hence, neither new partners nor current partners may stop being partners while submitting an application.
iii) At least two partners must have a DPIN prior to submitting such an application, and all partners must possess a valid Digital Signature Certificate (DSC).
iv) The Partnership Act of 1932 requires that the partnership firm to be converted be registered.
v) Consent from each partner must be acquired.
vi)The partners in the partnership firm and the LLP must be the same. After the conversion is finished, any partner who wants to leave the LLP may do so.
vii) All designated partners must have a Director Identification Number (DIN) or Designated Partner Identification Number (DPIN).
Process of conversion from Partnership firm into LLP
1.DSC and Name Approval
a) LLP Name Approval
i) Create an account on the MCA site and then log in.
ii) Select the "RUN – LLP" option in the MCA Services menu under Name Approval.
iii) Reserve Unique Name is referred to as RUN.
iv) The "Conversion of Firm into LLP" option in the dropdown list must be chosen.
v) Following that, two suggested names for the LLP are presented.
vi) Additionally, you can submit any supporting papers in PDF format before clicking the "Submit" button.
vii) The page is forwarded to a payment channel where the form's 200 rupee charge must be paid.
After then, the reserved name is valid for ninety days.
b. DSC (Digital Signature Certificate) of Partners
i) The Designated Partners of the LLP must have their individual Digital Signature Certificates in order to move past the Name Reservation stage.
ii) To guarantee a successful submission, the DSCs of the Designated Partners must be included to the appropriate e-forms.
2. Submitting the Forms to the ROC
a. Application and Statement for Converting a Firm into an LLP (Form 17)
i)The application form must be completed with details such the RUN-LLP form's Service Request Number (SRN).
ii) The proposed LLP's name.
iii) The firm's name, address, registration information, and partnership agreement data.
iv) Details about the required capital investment and the number of partners secured creditor information.
The given documents must be attached:
i) The firm's partners' consent statement.
ii) A statement of the company's assets and liabilities that has been approved by a licensed chartered accountant.
iii) The acknowledgement of the recent ITR.
iv) A list of every secured creditor, accompanied by their approval.
v) Any further supporting data (optional).
b. The Form FiLLiP (LLP Incorporation Form)
The following must be entered on the application form:
i) The RUN-LLP details that will be automatically submitted.
ii) The LLP's registered office address and email address.
iii) Registrar's office.
iv) The nature of business operations.
v) Partner and designated partner details, including DINs, DPINs, and PANs.
vi) The quantity of contributions made by the LLP's partners.
The following attachments must be attached:
i) Evidence of the LLP's registered office address.
ii) Consent of the subscriber.
iii) A copy of utility bills (no more than two months old) and a NOC from the property's owner.
iv) Approval, if required, from any regulatory body.
v) Information about any LLP or company in which a designated partner also serves as a director or partner.
vi) Evidence of the applicants' residence and identity.
vii) A copy of the board resolution or consent of the current LLP acting as a No Objection Certificate is required in cases where the LLP's name is the same as that of any already-existing company or LLP.
3. Registration Certificate Is Issued
After the application is approved, the Registrar will issue the LLP's Certificate of Registration.
4. LLP Agreement
Within 30 days of the LLP's incorporation, the LLP Agreement must be turned in on Form LLP-3. It will include the following details:
i) The LLP's name
ii) The names of the other partners and the designated partners
iii) Type of ratios for capital contributions and profit sharing
iv) The LLP's regulations
v)The partners' obligations and rights
5.Notification to the Firm Registrar
i) Within 15 days of the date of incorporation, the Registrar of Firms must be notified of the conversion to an LLP and any relevant information about the LLP using Form-14. The following must be included with the form:
ii) Copies of the incorporation materials filed on Form FiLLiP and the LLP Incorporation Certificate. The transition from a partnership to an LLP is considered complete once all of these procedures have been followed. However, it should be mentioned that the LLP does not inherit the previous licenses and permits. After conversion, they must be reapplied for.
iii) After obtaining the necessary paperwork, the Registrar has the option to accept or reject the LLP's registration. A certificate of registration will be issued by the Registrar if all documents are determined to be accurate and compliant with the act's stipulations. The LLP will notify the Registrar of firms with which it is registered on Form 14 within 15 days of registration. An appeal may be filed with the tribunal in the event that the Registrar denies registration.
Documents required
i) Each partner must provide a declaration to the Registrar detailing the firm's name, registration number (if applicable), and the date of registration under the Indian Partnership Act 1932 or another law.
ii) Together with the statement in the required format from a chartered accountant, company secretary, cost accountant, advocate, or other person involved in the LLP's formation, the incorporation document must be submitted to the Registrar attesting to the fulfilment of all incorporation-related requirements.
- FAQ
1. Can an LLP be converted into a Partnership Firm?
As long as it complies with the legal and administrative conditions set forth in the Limited Liability Partnership Act of 2008 and other pertinent laws, an LLP may indeed be changed into a partnership firm. The partners' consent and the required MCA portal filings are needed for this conversion.
2. Are there any restrictions on converting an LLP into a partnership?
Indeed, a few requirements must be fulfilled:
i) There shouldn't be any unpaid obligations or liabilities for the LLP.
ii) The Limited Liability Partnership Act of 2008 mandates that the LLP adhere to the legal criteria.
iii) To change the LLP into a partnership, all of the partners must concur.
3. Is there a fee involved for conversion?
Indeed, there are costs associated with submitting documentation to the MCA; these costs differ according to the kind of application and the partnership firm's or LLP's capital contribution. The MCA website provides the pricing schedule.
4.What is the timeline for conversion?
Conversion times can vary, but generally speaking, if all paperwork and procedures are in place, the MCA will process and authorize the conversion in 15 to 30 days.
5. What happens to the assets and liabilities during conversion?
Following conversion, the partnership firm will instantly acquire the LLP's assets, liabilities, and all legal rights or duties. Throughout the procedure, partners should make sure that all of the LLP's obligations are paid off or accounted for.
6. Will the PAN or GST number of the LLP be transferred?
Since they are separate legal organizations, the partnership firm may need to register for a new PAN and GST after conversion. Once the conversion is complete, you will need to apply for a new PAN and GST number.
7. Can this process be done online?
Yes, by electronically submitting the required forms, an LLP can be converted into a partnership firm online using the MCA portal.
8. Can an LLP with a single partner be converted into a partnership firm?
No, at least two partners are needed for a partnership firm. Therefore, a one-partner LLP cannot be changed to a partnership firm.
9. Is a new partnership deed required for the conversion?
Yes, after the LLP is changed to a partnership firm, a new deed needs to be signed. The terms and circumstances of the partnership firm, including the capital contributions, partner positions, profit-sharing ratio, and other pertinent provisions, shall be outlined in this partnership deed.
10. Will the name of the LLP be retained after conversion?
After becoming a partnership firm, the LLP's name cannot be automatically kept. The partnership firm name, which may or may not be the same as the LLP name, is the one under which the new partnership firm must apply for registration. If the partners want to keep the same name, they need make sure it conforms with partnership firm requirements and change the name appropriately.
11. What happens to the registered office of the LLP after conversion?
Unless the partners opt to change the office address, the LLP's registered office will stay the same after the conversion. If the registered office is moved, the authorities must be informed and the new location must be recorded in the appropriate documents submitted to the MCA.