Procedure to convert LLP into private limited company

568 votes

Hi..

You can convert an LLP into a Pvt. Ltd. Company under Section 366 of the Companies Act, 2013 read with Company (Authorised to Register) Rules, 2014.

However, there are several requirements to be satisfied for such a conversion to take place, such as, the LLP should have a minimum of 7 partners, an approval is to be taken from all partners, newspaper advertisement is to be issued in a national and local daily, an NOC is to be taken from the Registrar where the LLP is registered and then the incorporation process is to be undertaken including approval of name, securing DIN etc. Apart from the above there are several other reauirements which are to be satisfied to be eligible for conversion to a Pvt. Ltd. Company.

Additionally, conversion process gives you certain tax benefits (capital gains tax benefit), however to avail the same various requirements have to be met, such as, the partners maintaining the same shareholding as held in the LLP when the conversion takes place, for 5 years from the date of conversion the erstwhile partners of the LLP who have become shareholders in the company cannot in aggregate have less than 50% shareholding, no benefits to be given to LLP partners who are becoming shareholders in the Company etc.

Therefore, though law provides for conversion of LLP into a Company, however, the conditions under law have to be met first.

The second option available is to set up a separate Pvt. Ltd. Company and then get the entire business of the LLP transferred to the Company through a written agreement in which case the above mentioned restrictions such as newspaper publication, need for minimum 7 partners etc. are not required to be met. Having said, in this scenario there is no option like in the above scenario, to save yourself from imposition of capital gain tax. Further, there is stamp duty implication also in such a transfer.

It is therefore your call to opt for the most suitable option depending on the factors mentioned above and otherwise.

Hope the above is helpful.

Advocate Tushar A John LawRato

675 votes

As of now, in India a LLP cannot be converted to Private Limited Company. Though there is an option available for converting a Company into a LLP but not vice versa.
So you can't convert the LLP into a company.

Advocate Pulkit Prakash LawRato

824 votes

Kindly mention all facts regarding your matter we are bound to give answer of a query which have some Technical difficulties this forum is not for asking academic questions so kindly ask relevant questions

Advocate Siddharth Dev LawRato