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In the recent years there has been a shift from the traditional Partnership firms to Company , Conversion of partnership firm to Limited Liability Partnerships (hereinafter referred to as LLP) . LLP’s are in the picture ever since the introduction of Companies Act,2013 .This is mainly because of the flexibility and limited liability the LLP’s provide and also less compliance cost. Section 55 of LLP Act,2008 enables a partnership firm to convert into LLP and Second Schedule of 2008 Act and Rule 38 of LLP Rules ,2009 specifies the criteria to be followed for such conversion. The strain which the partners have regarding their personal assets in a partnership firm is not there in LLP’s as they are a hybrid of a partnership firm and a private limited company. BENEFITS OF CONVERSION Limited Liability Partnership is one of the easiest forms of business to get incorporated and also to manage in India. It has a incorporation process which is hassle free and also the compliance formalities are simple.Some of the benefits of conversion of partnership firm into llp are : Perpetual Existence: For a partnership firm the existence is limited and it can also go for dissolution on the death of one partner or all partners except for a partner becoming insolvent or insane in the absence of any contract to the contrary. Whereas Limited Liability Partnerships enjoy perpetual existence and also is a separate juristic person whose existence is not dependent on the partners. Even if the partners of the llp keep changing at regular intervals it does not affect its existence. Flexibility of Management: There is a considerate amount of leverage given to partners for conducting day to day affairs of the LLP and taking decisions. The LLP Act stands flexible on how the agreement can be drawn up. Limited Liability : Members /Directors have limited liability in an LLP .They are not held accountable for the loss even during liquidation. Their liability extends to the capital contribution agreed by members of the company. Unlimited Partners : Unlike Partnership firms there exists no limits regarding the number of partners in a LLP. EFFECT OF REGISTRATION Post registration the LLP shall come into existence by the name which is stated in the certificate of registration and all the assets, liabilities and the rights and privileges which the firm possessed shall vest in the LLP. If there exists any order or judgement be it in favour or against the firm may be enforced against the LLP. All the agreements and contracts in which the firm was party shall continue with the LLP. The LLP’s which are registered in India have to file MCA annual return and income tax return each year. If the LLP’s fail to file a tax return or MCA annual return this can lead to penalty and disqualification .
To Obtain Converted LLP
- Obtaining DSC And DIN
- Application For Name Approval
- LLP Agreement
- LLP Incorporation Certificate
- Application For PAN & TAN & Bank Account
Obtaining DSC of the desired partners of Limited Liability Partnership is the first step of the process as all the forms are required to be submitted online and the directors' digital signatures are needed for that. Also there is a requirement for all the directors to file for a DIN number. The application needs to be made in Form DIR- 3.
Registration of the LLP is involved in this step . One needs to check whether the name has already been taken. Free search facility of MCA portal can be availed for this purpose . Registration of only those names of LLP are approved by the Registrar that have not been taken before. If the Central Government does not deem it undesirable , the Registrar will approve of the name . There should not be any resemblance in the name to any of the existing partnership firms, LLPs, trademarks, or body corporates.
LLP agreement determines the mutual rights and duties amongst the partners, and between the LLP and the partners hence it is very important in a limited liability partnership . The LLP agreement is entered upon by partners for the LLP registration by filing form 3 online on the MCA portal within a span of 30 days of the date of incorporation, this procedure needs to be completed .
Once the MOA and AOA are approved by the registrar, the next step is to get the LLP Incorporation Certificate. It is done by submitting all the required documents to the registrar. It may take between 2- 12 days to issue the LLP Incorporation Certificate
After getting the incorporation certificate, one needs to apply for PAN & TAN with the NSDL. It may take around three weeks to get done , at a nominal cost of Rs 200
Estimate Time Required
After receiving the required documents the Registrar may either accept or refuse for the registration of LLP. If the documents received are in accordance with the provisions of the Act a certificate of registration shall be issued by the Registrar. However if the registrar refuses for registration an appeal for the same can be made to the Tribunal.
Documents Required for Convert Partnership Company to an LLP
For the conversion of firm in to LLP Form 17, LLP Form 2 and LLP form 3 is required along with these documents :
Address proof of registered offices
Latest passport size photograph of Shareholders and Directors
Approval from the regulatory authority
Details of the partners and Directors
Partner’s consent
A copy of the latest Income Tax return filing
A No Objection Certificate from tax authorities
List of certified Assets and Liabilities
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FAQ
Yes by following the mentioned procedure
No. The partnership firm must be registered under the Partnership Act to get converted to an LLP.
It means a partnership can be converted to a private limited company . It is possible by following appropriate procedure .
General Partnership
Because of the limitation of one’s liability to the amount they have paid for their shares whereas in partnership the liability is unlimited.
A partnership firm is dissolved if any partner becomes deceased, is unable to continue his duties as a partner .Loss of profits, declaration of Bankruptcy and firm carrying unlawful activities are also the grounds for partnership firm dissolution.
Yes the partnership does not exist after the death of a partner unless there is a contract to the contrary that means if there is a contract which says that remaining partners can continue the business the partnership does not need to be dissolved.
If one partner leaves the partnership and there is no contract to the contrary the partnership gets dissolved.
In a general partnership all the partners are jointly and severally responsible for debts and obligations of the partnership.
