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The terms “private limited company” and “limited liability partnership” refer to two distinct concepts and business structures. The key concern of business owners is which type of business would provide them with the most rewards. The notion of LLP has recently gained popularity as a type of corporate structure that allows individual partners to be free of the concept of joint liability in a partnership firm. As a result, many business owners are opting to convert their Pvt Ltd company to an LLP.
Step 1 – All Designated Partners Who Do Not Already Have One Must Obtain a DIN
Step 2 – Convene a Meeting of the Board of Directors
Step 3 –Make an application to reserve the name of the LLP
Step 4 –File the Incorporation Form (FiLLiP Form)
Step 5 – Make an application for the conversion into an LLP
Form 18 must be duly filled and filed to convert an existing company into an LLP. One must file this form along with the incorporation form.
Form 18 must contain the following information
Step 6 – Obtain the certificate of incorporation
Once all filling formalities are successfully concluded, the ROC verifies the information provided and issues a certificate of incorporation, if all the prerequisites are met. The company thereafter gets converted into an LLP.
Step 7 – Draft the LLP agreement
After incorporation, the designated partners must draw up an LLP agreement that must contain the following information:
Step 8 – File E-Form-3 and E-Form-14
Two forms namely, Form-3 and Form-14 must be filed in the next step.
E-Form-3 contains data regarding the LLP Agreement. This form must be filed within 30 days of converting your company into an LLP, by attaching the LLP agreement to the form.
E-Form-14 is used for intimating the Registrar of Companies of conversion of the company into a limited liability partnership. This form must be filed within 15 days of the conversion. Finally, along with Form-14, the following documents must be attached:
In this section, we will address the tax implications of converting a private limited to an LLP. The move from a private limited company to an LLP is not considered a ‘transfer’ under the IT Act, hence capital gain tax is rarely levied.
However, the conversion will not attract capital gain tax only if the following terms and conditions are fulfilled:
Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of the LLP Act.
Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of the LLP Act.
LLP shall have option to declare one more address within the jurisdiction of same ROC (other than the registered office) for getting statutory notices/letters etc. from Registrar.
Persons, who subscribed to the “Incorporation Document” at the time of incorporation of LLP, shall be partners of LLP. Subsequent to incorporation, new partners can be admitted in the LLP as per conditions and requirements of LLP Agreement.
Every LLP would be required to file Annual Return with ROC. A duly authenticated Annual Return in e- Form-11, is to be filed with the Registrar, together with the prescribed fee, within a period of 60 days from the closure of every financial year.