The shift from traditional partnerships to Limited Liability Partnerships (LLPs) has increased in recent years. The reason behind this is that LLPs offer more flexibility, unlimited partners and the like
The shift from traditional partnerships to Limited Liability Partnerships (LLPs) has increased in recent years. The reason behind this is that LLPs offer more flexibility, unlimited partners and the like. But the real reason behind the shift is due to the fact that LLPs offer a major advantage in terms of limited liability. The strain on the personal assets of the partner is put to rest when it comes to LLPs since they are of both a partnership and a private limited company. Small and medium-sized businesses find this organisation structure to suit their needs very well.
The advantages of the Limited Liability Partnership (LLP) form of business outweigh those of the traditional partnership. Limited liability, perpetual succession and unlimited partners are the key incentives for a partnership firm to convert itself into an LLP.
Eligibility for the conversion of Partnership Firm to LLP
- The partnership firm must be registered under the Indian Partnership Act, 1932.
- If the firm is not registered under the Indian Partnership Act, 1932 then the name of the Statute under which it is registered has to be mentioned at the time of conversion.
Important Points for Conversion of Partnership to LLP
- The first thing you need to do while the conversion of a partnership into an LLP is to get a DSC (Digital Signature Certificate). All the partners will require a digital signature.
- Then, obtain a DPIN (Designated Partner Identification Number). It is mandatory for at least two partners in order to proceed with the conversion. It is a one-time number. There is no renewal or anything associated.
- Next, apply for name approval. The name should be selected carefully. Limited Liability Partnership will be used at the end of the company’s name.
- Finally, file LLP Form 17, LLP Form 2 and LLP form 3 for the conversion. Certain documents are required along with the form.
- Address proof of registered office,
- Approval by the regulatory authority,
- Details of the partnership (including details of partners and directors)
- Consent of all the partners,
- Copy of the latest income tax return (can be an acknowledgement),
- No Objection Certificate from tax authorities,
- List of creditors and their consent, and
- List of certified liabilities and assets.
- After the successful filing of all the documents along with prescribed fees, verification will take place. After which, a certificate will be issued to you. Hence, completing the conversion of your partnership into a Limited Liability Partnership successfully.
On successful conversion of Partnership Firm into LLP, the Registrar will issue a Certificate of Incorporation of LLP and all the properties, assets, interests, rights, privileges, etc. of the firm are now transferred to the LLP. In other words, the complete undertaking of the firm is transferred to the LLP.
However, any approval that is issued under any law to the Partnership Firm will not be automatically transferred to the Limited Liability Partnership. Therefore, fresh licenses or any registrations may be required. This aspect of the conversion of a Partnership into LLP must be well considered before the conversion process.