Steps to Convert Partnership to LLP and How to Maximize the Benefits
With the change in technology, the competition of the global marketplace is also intensifying. To match the needs of the business, these days company owners are finding ways to convert Partnership to LLP Companies. In developing countries like India, these conversations seem to be taking place in almost every corner of the country. The partnership to LLP change is acting as a catalyst for the emergence of new businesses and start-ups. LLP structure of business tends to benefit both the company as well as the partnership firms by allowing them to work with each other flexibly. The LLP registered companies need to follow a lot of lesser compliance rules that ensure the smooth functioning of the organization. Not only just that, but it also provides a few simple steps for the firms to get themselves enlisted for the Limited Liability Company certificate.
What is LLP and Partnership?
A Partnership company forms of two or more partners with their end goal is to earn a profit. The Partnership Act got formulated in the year 1932 to help the company owners establish their firms without getting into the difficulties of following various compliance. This is because it is a voluntary option for businesses to get through the registration process. The revenue of the firm relies totally on the partners and the debts and losses are also their joint liability.
The Limited Liability Partnership Act formed much later, in 2008. The LLP business partners are not personally responsible for the debts and loss of the firm but having said that, the partners will be liable for losses that come under their percentage of contribution to the LLP firm. The LLP Company must get the business registered with the government. This is how Partnership and LLP differ from each other.
Benefits of LLPM
- No personal responsibility of the partners to fulfil the debts of the company.
- No constraint to the maximum number of partners. Hence, it becomes straightforward to develop a business.
- Mandatory audits after incurring 40 lakhs of revenue in one financial year. This improves the working of the company.
- Easy to apply for a corporate loan due to the proper maintenance of records.
- The capital gain fee is not charged on conversion.
- It is a distinct lawful entity which allows the partnership to continue even if one of the partners exit the firm or deceased.
What Are the Steps to Convert Partnership to LLP?
Are you looking forward to changing your business structure? If it is true then you just need to follow some simple steps to convert Partnership to LLP. This is one of the best approaches for businesses to expand and grow. Below are the steps that you need to go through for the conversion.
- Get the Digital Signature Certificate: In the first step, it requires to have the DSC for the partners of the LLP. Since the entire conversion process is online so the partners will have to provide their digital signature all the time.
- Get the Director Identification Number: Each partner of LLP gets a unique number. This DIN/ DPIN, once obtained, can be used throughout life. Renewal is not needed for DIN. This step is mandatory to convert Partnership to LLP.
- Get the company name: Submit the E-form1 to the registrar for getting the approval. Mention the decided company name in the form. The name must be unique and approved by the Central Government of India. As per the Trade Marks Act, 1999, the name must not match with any of the closed, existing, or registered company. Check the Ministry of Corporate Affairs’ official site for the name list.
- Application to convert Partnership to LLP: Three documents are required to submit in this step: subscribers’ sheet, E-form 17, and incorporation application. Download the form from the Ministry of Corporate Affairs portal. Documents submitted with the E-Form 7 are
- Written declarations from the partners.
- E-Form 2 statement along with the incorporation papers.
- A true copy of the declared liabilities and assets of your company.
- Recently submitted Income Tax Return copies.
- Authorization of any regulating body.
- Introduce the names of all the credit lenders (secured) stating their approval for the conversion.
- Clearance from the Income Tax department.
- Details about the pending and/or past court cases (if any).
- Submit Form 2 and Form 3 with the following papers:
- LLP company address proof
- Subscribers sheet
- Consent form
- Documents of the firm where the partner is an existing partner.
What Comes About After the Partnership to LLP Conversion Process?
Once the Partnership firm converted to LLP, the registrar provides the LLP incorporation certificate. Everything related to the firm such as assets, rights, properties, privileges, etc gets transferred to a Limited Liability Partnership. Now, you will have to apply for a new license and permit after the LLP conversion because all the Partnership licenses and permits get void.
Who Can Assist to Convert Partnership to LLP?
The procedure to convert Partnership to LLP can be complicated if you don’t know how to do it. Not to forget, business registration is also a very time taking process. At 3E Accounting India, we assist our clients to understand the entire process and assist in business expansion. Our team is popular for empowering business owners with the assistance for company formation, conversion of business structure for business growth. We believe in meeting the demands of our clients as our priority. If you are looking forward to converting your business to LLP, then get in touch with one of our dedicated representatives and we will be happy to assist you.