Partnership Conversion into LLP

Partnership Conversion

Partnerships and Limited Liability Partnerships are many times confused to be one and the same thing. However, the statement is not at all true. Limited liability partnerships can be considered as an advanced version of partnerships. Or better LLPs are a form, a type, a classification of the partnerships. The biggest difference we can draw out is by looking at the form of liabilities given to the partners and the shareholders in both forms of business. In a partnership, unlimited liability is given to the partners and the shareholders. However, in a limited liability partnership, as the name suggests, limited liability is given to the partners and the shareholders. Partnerships are, therefore, considered to be quite risky. It puts the personal assets of the shareholders and the partners at stake. LLPs, despite being a new concept in India, are gaining a lot of positive attention of the Entrepreneurs due to several reasons including the limited liability prospect as well as the no minimum share capital prospect. Entrepreneurs are now converting their firms and companies into LLPs. Discussed below is the partnership conversion into an LLP.

It is quite obvious as to why someone will want to convert his partnership into an LLP. However, partnership conversion is not that simple. Certain documents are required. A proper legal procedure has to be followed. Certain specified forms are to be filed also.

You will need to follow the following steps in order to proceed with the partnership conversion.

First of all, a DSC (Digital Signature Certificate) and DPIN (Designated Partner’s Identification number)/DIN(Director Identification Number) [To avoid duplicity, DPIN and DIN were integrated by MCA circular dated 8th July, 2011. Either DPIN/DIN can be used.] will be required. Both are very necessary to proceed with the conversion.

Then a name is selected. Name approval can be very difficult. There are certain things you need to keep in mind while going with the name selection. The name should be unique completely. It should not be offending in any way. Also, it should be easy to remember. The name should also end with Limited Liability Partnership or LLP. After the name selection, apply for the name approval. The approval of name is mandatory in order to proceed further. LLP Form 1 needs to be filled for name approval.

Next, file LLP Form 2 (Document of Incorporation and Subscriber’s Statement), LLP Form 3 (Information regarding LLP Agreement) and LLP Form 17 (Application for conversion is to be filled in Part-A and a Statement of the Partners in the format provided in Part-B), LLP Form 4 and LLP Form 9 (Notice of appointment of Partners, cessation, change in name/address/designation of a designated partner or partner and consent to become a partner / designated partner) with other specified documents.

These documents include-

Address proof of registered office,

Approval by regulatory authority,

Details of partnership (including details of partners and directors)

Consent of all the partners,

Copy of the latest income tax return filing (can be acknowledgment),

No Objection certificate from tax authorities,

List of creditors and their consent, and

List of certified liabilities and assets.

All these documents are finally submitted to the Registrar along with the prescribed fees. An online application can be also filed. Verification takes place. After the satisfaction of the registrar, a certificate is issued. The certificate indicates the successful conversion of your Partnership into a Limited Liability Partnership.

Also, the Registrar of Firms must be informed of the conversion in LLP Form 14 within 15 days of receiving the Certificate of Registration from the ROC.

The LLP must, in every official correspondence, for a period of 1 year, starting not later than 14 days from the date of registration:

(a) A statement that the firm was from the date of registration converted into an LLP.

(b) The name and registration number, if any, of the firm from which it converted into an LLP.

Partnership conversion may seem like an overwhelming process due to all the documents involved. However, we, at LegalRaasta can make this whole process a lot quicker and easy for you. All you need to do is fill in some basic details regarding yourself and your company registration.