Conversion of a Partnership Firm into an LLP

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Limited Liability Partnerships have become the premier choice for small and medium-sized business after the introduction of LLP Act, 2008.  LLP is a business structure which offers almost all the advantages of a Partnership and at the same time alleviates the demerits of the traditional partnership to a very large extent. These advantages of LLP over Partnership firm coupled with the flexibility of a partnership and limited liability serve as the foundation for an LLP.

A Limited Liability Partnership (LLP) can prove to be a much better business vehicle than a regular partnership. In case of an LLP, the partners are not personally liable for anything and also have a perpetual succession. Moreover, there are tax benefits, no capital gain tax, no stamp duty and no audit requirements below a certain capital which makes it one of the most sought-after corporate structures. Any firm may convert into a Limited Liability Partnership in accordance with the provisions of Section-55 of LLP Act, 2008 ( second schedule).

Why should you convert your partnership firm into LLP?

1. Separate Legal entity
A partnership firm is not a separate legal entity, it’s merely a collective name given to the individuals composing it, whereas, LLP is a separate legal entity distinct from its members/ partners.
2. Limited Liability
In a Partnership firm, partners are personally liable for all their debts. So in case they are not able to repay any outstanding, the partners would have to sell their personal possessions to do so. However, in an LLP, only the amount invested in starting the business would be lost; all personal assets would be safe that is there is no liability to the banks/creditors.
3. Unceasing Existence
In a Partnership firm, a firm will be affected by the death or the departure of a partner. However, LLP being a separate legal person is unaffected by the death or departure of any partner. Hence, an LLP continues to be in existence irrespective of the changes in the ownership.
4. Flexibility
LLP offers participants greater flexibility in the management of the business. Partners have full authority how they will individually contribute to the business operations.
5. Number of Partners
A Partnership Firm must have a minimum of 2 Partners and can only have a maximum of 20 Partners. However, in an LLP, minimum of 2 partners are required and there is no limit on the maximum number of partners.
6. No Stamp Duty
All movable or immovable property of the partnership firm directly transferred to an LLP. No Instrument of transfer will be required for that purpose, therefore, no stamp duty will be required to pay.
7. Automatic transfer
All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the LLP.

Minimum Requirements for Conversion

  • Up to date filing of income tax returns
  • Digital Signature Certificate for one of the designated partners
  • Designated partner identification number (DPIN) for all partners
  • Minimum 2 Partners required
  • At least 1  Designated Partner must be Resident of India (ROI)
  • Consent of Majority of Partners for the conversion of firm into LLP
  • Consent from all the unsecured creditors for conversion of firm into LLP
  • Minimum Contribution from all the partners
  • Registered office for the existing Partnership firm

What is included in our package?

  • Designated  Partner Identification Number (DPIN) for 2 Partners
  • Digital signature for 2 Partners
  • Name Search & Approval
  • LLP Agreement
  • PAN Card for LLP
  • Registration Fees

You May Also Want To Know

1. How many persons are required to convert partnership firm into LLP?
    Ans.Two or more persons are required to convert a partnership firm into LLP.

2. Who can become a partner in LLP?
    Ans.Any Person can become a partner in LLP, that person can be individual or body corporate.

3. What are the qualifications for becoming a partner in LLP?
    Ans. Any Individual or body corporate may become a partner in LLP. However, An individual with an unsound mind or an individual adjudicated as an insolvent and his application is pending cannot become partner in LLP

4. Who can be a “Designated Partners”?
    Ans.Every LLP shall be required to have at least two designated partners who shall be individuals and one of them shall be Resident of India (ROI).

5. Can NRI or Foreign National become a designated partner in LLP?
    Ans.Yes, Foreign national or NRI can become a designated partner in LLP but only after obtaining Designated partner identification number (DPIN) and Director Identification number (DIN).

6. What will be the treatment of Assets and Liabilities of the firm after conversion?
    Ans.All the assets and liabilities of the partnership firm immediately before conversion become the assets and liabilities of the LLP.

7. Is it required to pay stamp duty at the time of transfer of property during conversion?
    Ans.No, stamp duty is required to be paid at the time of conversion because no instrument of transfer is required to be executed.

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