Private Limited Company to LLP Conversion: Process & Compliance

A Limited Liability Partnership (LLP) is a combination of limited liability benefits and a partnership structure. Many businesses carry out pvt ltd to llp conversion to enjoy simplified compliance requirements and lower costs of running a business. The conversion is subject to the provisions of the Limited Liability Partnership Act, 2008 and relevant provisions of the Companies Act, 2013.

According to media reports, a total of 1,85,314 companies and 58,990 Limited Liability Partnerships (LLPs) were incorporated in the fiscal ended March 31. That is a huge increase from the last fiscal year data which showed, a total of 1,59,339 companies and 36,249 LLPs were incorporated in 2022-23.

If you want to convert your Private limited company to LLP then you have to follow a legal process that enables an existing private limited company to get converted into limited liability partnership without having to set up a fresh business. Conversion of pvt ltd company to llp, means the company is dissolved, and all its assets, liabilities, rights, obligations, and undertakings are transferred to LLP as per the applicable legal provisions in effect.

When you convert your business, it allows it to continue its existing operations under LLP structure. Converting doesn't mean starting anew. This offers flexibility in management and reduces compliance requirements compared to private limited companies. The conversion of pvt ltd company to llp is subject to the eligibility criteria and legal terms that you need to fulfil.

The conversion of private company into llp, is usually chosen by businesses to lessen compliance requirements and have more operational efficiency. LLPs do not have to comply with the numerous provisions of corporate governance applicable to the companies, and therefore, they are highly preferred by professional firms, consulting firms, family businesses, and small business owners. If you wish to start afresh as LLP rather than going for conversion, you may also consider Limited Liability Partnership (LLP).

The benefits of converting a Private limited company to a LLP are:

Partners have limited personal liability protecting their personal assets.

Less Complex Compliance Rules

Compared to companies, LLPs have less demanding compliance rules and procedures.

Management Controlled by Partners

Partners are in a position to operate the LLP and follow the LLP Agreement.

Independent Legal Entity

When a company to llp conversion is done, the latter is a legal entity that can own property, sign contracts, and carry out business operations.

Continuation of Existence

The LLP carries on irrespective of any changes in the status of its partners.

A private limited company may convert itself into LLP by meeting provisions of the LLP Act and its rules. Basically, this means that:

• All the shareholders will become partners of LLP.

• There should not be any charge on any asset of the company at the moment of conversion.

• The company must have fulfilled the necessary legal requirements before filing the conversion application.

• The company must have made all legal filings with the Ministry of Corporate Affairs (MCA).

The company conversion to llp takes place under the jurisdiction of the Ministry of Corporate Affairs (MCA) which executes the digital filing of the necessary documents for conversion. The Registrar of Companies (ROC) views the request presented by the company and, following his satisfaction, will issue the Certificate of Registration of LLP.

These are the important Documents most commonly required for registration:

• Company's Certificate of Incorporation

• Company's PAN

• Identity and address proof of all the partners or shareholders

• Board's Resolution regarding conversion

• All partners' consent

• Audited financial statements for the latest year

• Income Tax Return acknowledgment

• Name list of creditors with their consent

• Proof that premises where the registered office is located are legally owned

• Digital Signature Certificate (DSC) of a designated partner

• Introduced Partnerships Identification Number (DPIN/DIN) if applicable

• Draft of LLP Agreement (once it is finalized and approved)

Requirements for documents may change depending on the compliance of a company.

The private company to llp conversion process is done by the MCA. There are certain steps that you need to follow that are prescribed under the LLP Act.

The steps are:

Step 1: Check Eligibility

To begin you must confirm that every person who owns shares in the company will also be a partner in the Limited Liability Partnership (LLP). It is necessary that the assets of the company are not subject to any active legal claims or debts that are secured by those assets. By this stage the company must have submitted all legal documents that the law requires.

Step 2: Acquire DSC & DPIN

For the process to continue, the individuals who will act as designated partners must have valid Digital Signature Certificates. If the individuals do not already have them, they must also get a Designated Partner Identification Number before they submit the application.

Step 3: Name of the LLP

As a next step you must apply to keep the name you want for the LLP on the portal of the Ministry of Corporate Affairs. The name is required to follow the rules for names that are written in the LLP Act.

Step 4: Documents and Paperwork

In this step you collect the documents for incorporation, the written agreement of the shareholders and a list of people to whom the company owes money. You must gather the reports on the financial status of the company, the document that proves where the office is located and other files that are needed to change a company to llp conversion.

Step 5: Submit the Application for Conversion

To move forward you send the official forms for LLP incorporation and conversion through the Ministry of Corporate Affairs portal. With those forms you provide the extra documents and pay the money that the government requires for this service.

Step 6: Review by the Registrar

When the application is received, the Registrar looks at the forms and the documents. If the Registrar finds that information is missing or unclear, the person who applied may need to give more details or fix errors.

Step 7: Obtain the Registration Certificate

On the condition, that the review is successful, the Registrar provides the Certificate of Registration for the LLP.

The timeline of converting the private limited company to llp conversion depends on documents, statutory compliance and procession time of the MCA office.

Typical timeline is:

The cost of the company conversion to llp depends on the government charges and Professional charges, if you have taken assistance from an expert.

Note: The above charges are for professional fees while the government charges like for MCA Filing fees, Stamp Duty are dependent on the state laws. You can contact Companyregister.co.in for the latest fees.

If the conditions are not fulfilled during the process of conversion of pvt ltd company to llp, rejection of the application might take place. Also, the person responsible for making filings will face the consequences imposed by Companies Act, 2013 and LLP Act, 2008. Therefore, it is necessary to ensure that all necessary compliances and historic submissions are completed prior to filing for registration.

Upon the successful completion of the procedure, the Registrar will provide the Certificate of Registration for the LLP. In essence, this certificate shows the fact of creation of the LLP.

The Certificate of Registration has an unlimited period of validity as long as the LLP does not get dissolved or cancelled according to the LLP Act. However, it is important that the LLP follows all necessary filing and compliance regulations.

Once the conversion of private company into llp is done, you need to meet the regulations set for LLPs such as:

• Filing of Annual Statement of Accounts and Solvency

• Filing of Annual Return

• Filing of Income Tax Return

• Keeping the books of accounts

• Updating PAN, GST, bank accounts, and other registrations

• Following the LLP agreement

When there are any changes in the LLP after the conversion, the required forms have to be submitted to the Corporate Affairs Department within the set time frame.

After completing the company to llp conversion, you will be able to change the LLP details as per your choice. The common amendments include changes of registered office, partners, designated partners, businesses being performed, and the LLP agreement. Such amendments will be submitted to the Corporate Affairs Department of the country.

Once the registration process has been completed, there is no need to effect an annual renewal of an LLP. Nonetheless, it is still necessary to file the annual returns, financial statements, and Income Tax Returns each year in order to meet the requirements of the law as applicable to LLPs.

Consequently, while there is no renewal process after pvt ltd to llp conversion, the LLP is still required to comply with the annual requirements in terms of filing the Statement of Accounts & Solvency; Annual Return, and Income Tax Return in accordance with the stipulated timelines.

There are a number of reasons why the private limited company to llp conversion might be rejected or delayed, including the following:

• Unfulfilled obligations with the ROC

• Existing charges over the company’s assets

• Filing incorrect or incomplete forms as required by the MCA

• Partner or shareholder data being inconsistent

• Invalid DSC or DPIN

• Missing documentation

• Failing to meet the requirements prescribed by the LLP Act

We offer professional assistance to conversion of private company into llp inside the regions of Delhi, Maharashtra, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh, Haryana, Rajasthan, Punjab, Bihar, Jharkhand, Odisha, West Bengal and many other states. Our specialists are in charge of documentation, filing with the MCA, post-conversion registrations, as well as compliance.

Our specialists provide assistance to companies working in many industries, such as:

• Information Technology

• Consulting services

• Manufacturing

• Trading companies

• E-commerce

• Healthcare

• Construction

• Logistics

• Finances

• Professional entities

We assist clients from companies of all sizes in turning to LLP while being compliant with the MCA requirements. If you need any help after conversion, we provide services of Compliance Reports ensuring that your LLP meets the requirements.

Companyregister.co.in offers comprehensive help with company conversion to llp in India. Our qualified specialists check on eligibility, prepare papers, file forms with the MCA and help with post-conversion compliance.

From preparing documents until getting the Certificate of Registration, we make the conversion process smooth and compliant with the regulations relevant to Companies Act, 2013 as well as LLP Act, 2008.