Why you should opt for Conversion of Partnership firm into LLP?

What is a Partnership Firm?

A company with minimum two or more person sharing ownership of a business is called a Partnership firm.

Some of the features of a Partnership company are:

• A legal document known as the partnership deed or partnership agreement is drafted to define the nature of partnership within its members like profit sharing arrangement among its members.
• Partnership has unlimited liability. The member-partners will share the profits and incur the losses of the business.
• A partnership firm is a separate legal entity but individual partner firms are not.
• Minimum of two and maximum of ten partners are allowed in a Partnership firm arrangement.
• Structure remains same after incorporation, not flexible for newer partnership.
• Partnership dissolves after the demise of or withdrawal from partnership of partner(s).

 LLP – Limited Liability Partnership

A Limited Liability Partnership (LLP) is a company where all partners of the firm have limited liabilities with respect to each other and to the business operations. There are restrictions on the liabilities bestowed upon the members of an LLP. In this partnership arrangement, one partner’s dereliction or negligence does not affect other partners of the firm. Consequently, if you who want to be on the safe side when doing business in partnership, convert your Partnership firm into an LLP i.e., a Limited Liability Partnership, as there is a formal procedure to it, to get the mutual benefit of being a partnership firm with the limited liability aspect of a company.

Also Read: Conversion of sole proprietorship to private limited company in india

 Why convert a Partnership firm to an LLP?

• The main advantage of this conversion is the limited liability protection that make the LLP member-partners more independent and conduct their risk-free business operations.
• Small and/or medium sized partnership businesses can enter into an LLP agreement to bring their business synergies together with lesser risk involved.
• This conversion increases the flexibility in the decision making processes of the company.
• The demise or withdrawal of a member-partner in a partnership firm may cause the company to disintegrate, which is not the case with LLP. This is termed as the perpetual succession of an LLP firm even if the partners keep on changing.
• The liability of partners in LLP is limited to the amount of capital invested and there is no minimum limit to the amount of capital to be invested.
• There is no upper limit in case of maximum number of member-partners of an LLP.
• More LLPs can merge together to become a larger Limited Liability arrangement unlike in the case of a partnership firm.
• The conversion of partnership firm into LLP would bring more investments into the firm because of the reputation of an LLP being a better, more flexible business arrangement. Also, in case of the Foreign Direct Investments (FDI), the central government has relaxed the regulations related to the FDI into an LLP.

Things to consider before converting your partnership firm to LLP

Before converting your partnership firm to an LLP, the following criteria must be fulfilled:

• The partnership firm must have the consent of all the member-partners of the firm before initiating into the procedure of conversion to an LLP.
• The partnership firm must clear all the liabilities that they might have accumulated over their course of operation.
• If the firm has acquired any type of business certification under its name, the consent from the certifying authority for conversion must be acquired as well.
• The partnership firm also must have the consent of all the suppliers of the firm.

Required documents for conversion

• Designated Partner Identification Number (DPIN) or Director Identification Number (DIN), whichever is applicable.
• Digital Signature Certificate (DSC), necessary for digital authentication of the company.
• LLP-1 e-form: This e-form is needed to be filled to add “LLP” to the existing firm name. The registrar will then check for any resemblance to the existing firm names or trademark registered or pending registration.
• Draft of the proposed LLP agreement by the member-partners.
• Form-17 with Registrar of Companies (ROC): This is the actual conversion application which is to be filled and submitted along with the following documents:

• Consent statement of member-partners for conversion.
• List of all creditors of the firm along with their consent to conversion.
• Statement of assets and liabilities of the company duly certified by a Chartered Accountant.
• Approval from any other body/authority as may be required, say approval of the governing council for professional firms.
• No Objection Certificate (NOC) from income tax authorities.
• Financial statements of the Partnership firm.
• Particulars of court proceedings, if any.
• Rejection letter of ROC in case of any earlier conversion application

How to convert Partnership firm into an LLP: Complete Process

The complete process to convert a Partnership firm to a Limited Liability Partnership (LLP) is as follows:

1. Firstly, Obtain the DSC (Digital Signature Certificate) for all the member-partners of the firm.
2. Secondly, Obtain DIN or the DPIN for all the member-partners. A DPIN number, once created for a member-partner in a partnership arrangement, is valid for life.
3. Fill the LLC-1 e-form to get the approval for the name of the proposed LLP. This form must be filled out by the partners of the partnership firm.
4. Form-3 must be filled with the complete details of the drafted LLP agreement by the member partners of the firm and at the time of filing, the applicant must attach the original LLP agreement with it.
5. Filing the Form 17: Member-partners must fill the form to apply for the conversion of the partnership firm. The declaration has to be signed by all the individual partners of the firm. The digital signature of every respective partner is required for the same process.

Form must also be signed by a chartered accountant, company secretary or a cost accountant along with the following documents:

Consent of the partners of the firm.

• Authorized statement of the total assets and liabilities of the firm.
• Complete details of the creditors of the company.
• Consent of the member-partners for conversion.
• Copies of the ITRs filed by the Firm.

6. After the submission of the application of conversion and consequently its approval, the Registrar will grant the Certificate of Incorporation to the partnership as an LLP. By this certification, all the interests, assets and liabilities would be transferred to the LLP.
7. In case of change of status of the partnership to LLP, the partners of the LLP have to intimate the Registrar within 15 days of this process, by submitting it in the Form-14.

Also Read: Trademark Objection in India: Reasons, Grounds & Reply

Get your partnership firm converted to LLP with Registrationwala

Meanwhile, We at Registrationwala, will provide you with the following services in the process of converting your partnership company into an LLP firm:

• Registering for and acquiring the Designated Partner Identification Numbers (DPINs) and Digital Signature Certificates (DSCs) for your member partners.
• Filing for name approval of your firm.
• Drafting the LLP agreement for the proposed firm.
• Collecting and compiling the required documents for mentioned conversion.
• Submitting your application for conversion along with the documents.
• Reviewing the application and making changes if needed
• Obtaining Certificate of Incorporation

For instance, we are one of the leading legal consultancy firm in the country who can assist you in your partnership to LLP conversion.

Let us do the legwork on your behalf to create get you licensed as an LLP firm.