Everything you need to know to convert your Pvt. Ltd. to an LLP

 All you need to know if you wish to convert your Pvt. Ltd. Co. to LLP 

Introduction

Many private limited companies have closed their doors in recent years due to increased compliance requirements, regulatory burdens, and members' unlimited liability. However, with the passage of the Limited Liability Partnership Act of 2008, such closing corporations now have an easy and accessible option to convert themselves into an LLP. This blog includes information on how to convert your Private Limited company to an LLP, as well as other related information.

Pvt. Ltd. Company 

A Private Limited firm is a privately held firm for small businesses. The responsibility of members of a Private restricted Company is restricted to the number of shares they own. Private Limited Company shares cannot be exchanged publicly.

Limited Liability Partnership 

A limited liability partnership is a business that requires at least two members and has no upper limit on the number of members. An LLP's members have limited responsibility.

Conversion of a Limited Liability Partnership to a Private Limited Company 

Let us examine each critical aspect of converting a private limited company to an LLP:

Conditions to meet for converting a private limited company to an LLP

• Each member of the company must agree on the conversion option.
• The LLP's partners will be all of the members of the Private Limited Company.
• A copy of the most recent income tax return must be filed with the Registrar of Companies.
• The conversion must be agreed by all creditors of the private firm, not just the members.
• According to the Companies Act, no prosecution should begin the procedure.

Documents needed to convert your Private Limited Company to an LLP 

• Consent of each shareholder of the corporation to convert the firm into an LLP in the format specified.
• E Form incorporation document FiLLiP Form 3- LLP application and declaration of formation.
• Tax authorities' clearance/no-objection certificate.
• The company's asset and liability statement.
• List of all creditors, with permission from each.
• Any other country's approval.
• Permission to make a declaration.
• Attachments that are optional.

 Conversion process of a Private Limited Company to an LLP 

1. Obtain a DIN and hold a Board Meeting
2. Request for Name Availability
3. Create a Limited Liability Partnership Agreement (LLP).
4. Fill out E-form FiLLiP (Filing of Incorporation Documents) and submit it.
5. Fill out E-form 18 (Conversion Application).
6. Form 19: Certificate of Registration
7. Fill out E Form 3 (LLP Agreement Information).
8. Certificate of Incorporation as a Limited Liability Partnership
9. E Form 14 (Intimation to ROC) submission

Obtain a DIN:
The first step in converting a Private Limited Company to an LLP is to obtain a DIN for any specified partners who do not already have one.

The minimum number of partners required to form an LLP is two, with one of them being Indian. However, it is critical to apply for a DSC before applying for a DIN.

Conduct a Board Meeting:
The next step will be to call a board meeting of all board members to discuss the following topics:

• To adopt a resolution to convert a private limited company into an LLP.
• To pass a resolution authorizing any director to apply for the name of the LLP.

Request for Name Availability:
To reserve the name of an LLP, an application must be made. An application for reserving the name of a new LLP or modifying the name of an existing LLP can be made. The company name can be changed to the name of the LLP.

LLP Agreement:
A limited liability partnership agreement (LLP agreement) is a written document that defines the agreement between the participants of a Limited Liability Partnership. It establishes all partners' rights and responsibilities to one another and to the firm.

The agreement contains the following provisions:

• The name of the LLP
• Partners' Names & Designated Partners
• Profit Sharing Ratio Contribution Type
• Partners' Rights and Duties
• Proposed Business Rules for the LLP's Governance

Fill out E-form FiLLiP (Filing of Form of Incorporation):
Incorporation Document along with proof of address of LLP's registered office (Signed by each Designated Partner and witnessed by Profession to be filled out in E Form FiLLiP.

Fill out E Form FiLLiP and submit it to ROC along with the following attachments:

• Address proof for the LLP's registered office.
• The subscription forms.
• Acceptance of the role of designated partners and partners
• Proof of identity and residency of authorized partners and partners
• Information about the LLP(s) and/or company(s) in which the partner/designated partner is a director/designated partner. 

Fill out E-form 18 (Conversion Application):

Form 2 must be accompanied by another form. This is E Form 18, the solitary form required for the conversion of a Pvt Ltd Co. to an LLP. This Form must be submitted along with the accompanying attachments:

• Statement of shareholder consent (required)
• The independent auditor verified the company's financial statements as true and correct.
• List of all secured creditors, together with their permission
• Copy of latest income tax return acknowledgement (required)

Obtain a Certificate of Registration (Form 19):
Once all requirements and filings have been completed and authorized by the Ministry, the Registrar of LLP will issue a Certificate of Registration in form no. 19 in the case of the LLP conversion. The Certificate of Registration issued shall be definitive evidence of the LLP's conversion.

File E Form 3 (Information of LLP Agreement):
This form contains information regarding the LLP Agreement that the partners have entered into. This form must be submitted within 30 days following the company's conversion to an LLP.

LLP Agreement is required as an attachment.

Certificate of LLP Incorporation:
The next step would be to obtain the Certificate of LLP Incorporation.

Filing of E Form 14 (Intimation to ROC):
It must be filed within 15 days of the date of conversion after receiving the LLP's incorporation certificate.  

Attachments to be submitted with E-Form 14:

• Copy of the LLP's Certificate of Incorporation (COI).
• Copy of incorporation document filed to ROC in E-Form FiLLiP.

The Impact of Converting a Private Limited Company to an LLP 

Some of the repercussions of turning a corporation into an LLP are as follows:

• Following conversion, the private firm is dissolved.
• The private limited company's name will be erased from the ROC's registration.
• The conversion will have no effect on existing responsibilities, commitments, agreements, contracts, or employment.
• The company must notify the relevant authorities of the conversion and make the appropriate modifications to all registrations and licenses.

The Advantages of Converting a Private Limited Company to an LLP 

• It has the advantages of limited liability to partners and partnership flexibility.
• When a private limited company is converted into an LLP, all of the company's assets and liabilities are transferred to the LLP. However, no transfer instrument is necessary. As a result, there will be no stamp duty implications for such transfers.
• There is no limit to the number of partners, as opposed to private limited businesses.  
• There is no requirement to convene a certain number of meetings or keep statutory records.
• LLP is a corporate body with the same legal status as a company.
• Unlike a partnership, the responsibility of the participants in an LLP is limited to the amount contributed by them.
• Other benefits after conversion include lighter rules, no limit on the number of members in an LLP, and so on.

Not only that, but there are some tax breaks available under the law. They are as follows:

• Dividend distribution tax is avoided. (There is no Dividend Distribution Tax provision in LLP.)
• MAT tax savings. (Because LLP does not award MAT credit)
• Income tax savings because of, interest and payment payable to partners as salary payable to directors.