Get the benefit of reduced compliances and cost by conversion of Private Limited Company to LLP.
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LLP is having combined features of a partnership firm as well as companies. It is an incorporated partnership formed and registered under the Limited Liability Partnership Act, 2008. LLP is a separate legal entity and perpetual succession
NoC from the tax authorities
Consent of all the directors and shareholders
LLP is not required to conduct any minimum number of meetings every year year, also not required to maintain any statutory records.
Tax assistance, Income tax act allowed limited liability partnership to set off and carry forward losses and unabsorbed depreciation of the company.
There is no restriction on maximum number of partners in LLP.
Few requirements of LLP procedure, a requirement of conducting a limited number of meetings in a year & maintenance of statutory records are not required on limited liability partnership.
Collection of documents of proposed partners of LLP and documents of company, along with consent of members and creditors, if any.
Filing of application form for the approval of name of the LLP on the MCA.
Preparation and filing of LLP form for application of conversion of firm into LLP.
After successful submission of application forms for conversion. SRN will be generated. This SRN can be used for tracking the status of application.
After successful approval of the form for conversion form ROC, conversion certificate will be generated.
Companies Act 2013 governs the regulatory compliance of conversion of companies into limited liability partnership and its regulatory guidelines for financial statements audit, required number of meetings, keeping of statutory records etc.
Limited liability partnership is a registered business organization whose turnover is decreasing frequently and for the purpose of less compliance burden in limited liability partnership, companies are converting their company into limited liability partnership(LLP). Thus, limited liability partnership (LLP) is the best form of organization.
All the assets and liabilities of the company immediately prior to the conversion become the assets and liabilities of limited liability partnership.
For availing benefit of section 47 of income tax act 1961, The total value of the assets as mentioned in the books of account of the company in any of the 3 previous years preceding the previous year in which the conversion takes place shall not be more than 5 crore rupees.
The shareholding pattern changes and shares were surrendered by shareholders and shall be duly informed to the concerned authority, The shareholders shall become partners for limited liability partnership.
In case of limited liability partnership, the minimum Capital clause is not mandatory on partners, it depends on the necessity of the business organization and contribution to partnership by partners.
After effects of conversion of company into Limited Liability Partnership (LLP) are-
All the assets and liabilities of the company immediately before the conversion shall become the assets and liabilities of LLP.
It is mandatory for generation of DPIN (Designated Partner Identification Number) for all the Designated Partners who wish to be appointed as a Designated Partners of a Limited Liability Partnership.
After receiving intention of conversion,Removal of name of company occured by ROC from Register of companies,As per Companies Act, 2013, the Power for Removal of Name of Company from Register of Companies (ROC) is provided to the registrar.
Any approvals, permissions, registration or license issued to the Company shall become null and void and will not be transferred automatically to the LLP and hence fresh licenses or registrations are required to be applied by LLP.
Income Tax Act, 1961 provides tax assistance in certain transactions which are not considered as transfer thus no capital gain tax applies. Under Sec 47 transfer of capital or intangible assets by private company or unlisted public company to LLP shall not be considered as transfer for capital gain in specified conditions under the act.
No amount is paid, either directly or indirectly, on the date of conversion for a period of 3 years from the date of conversion, to any partner out of balance of accumulated profit standing in the accounts of the company.
At least 2 Partners.
At least 2 Designated Partners.
Minimum any one of the designated partners must be an Indian Resident.
Yes, any other person can become a partner complying provisions of LLP Agreement. Under section 5 of LLP Act, 2008 and LLP rules only an individual or body corporate may become a partner in a Limited Liability Partnership.
Yes, Both Husband and wife can be designated partners in LLP. For tax assistance there exists a special agreement specifying tax liability to minimize the family tax liability.
BASIS OF DIFFERENCE | PRIVATE LIMITED COMPANY | ONE PERSON COMPANY | LLP | PARTNERSHIP FIRM | PROPRIETORSHIP CONCERN |
|---|---|---|---|---|---|
| Meaning | Private Limited Company Private company means a company which is formed by coming together of people for a profit motive. |
One Person Company One Person Company (OPC) means a company which is formed with only single person as a member. |
LLP LLP is a body corporate which is hybrid of partnership firm and company. |
Partnership Firm A partnership firm is not a separate legal entity distinct from its partners. It is merely a collective name given to the individuals composing it. |
Proprietorship Firm Proprietorship is a type of business that is owned, managed, and controlled by one person – who is the proprietor. |
| Prevailing laws | Companies Act Companies are governed by ‘Companies Act, 2013’& rules made under. |
Companies Act Companies are governed by ‘Companies Act, 2013’ & rules made under. |
LLP Act
Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under.
|
Partnership Act
Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under.
|
NA |
| Charter Documents | MOA & AOA Memorandum and Article of Association is the charter of the company which provides its main object clauses & scope of operation. |
MOA & AOA Memorandum and Article of Association is the charter of the company that defines its scope of operation. |
LLP Agreement LLP Agreement is a charter document of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. |
Partnership Deed Partnership Deed is a charter document of the firm which denotes its scope of operation and rights and duties of the partners. |
MSME (Udhyam Aadhar) Udyog Aadhar (MSME) is certificate which signifies that the entity is micro, small or medium enterprise. |
| Limit of Members | 2-200 It must have at least 2 and maximum 200 members. |
1 OPC is manages by one person only hence it requires only single person. |
2-Unlimited There is no maximum limit on number of partners but must have at least two individuals as Designated Partners. |
2-20 At least 2 partners are required for it and which can’t exceed 20 partners. |
1 Single owner i.e. proprietor required for Proprietorship firm. |
| Directors /Designated Partners | 2-15 It requires At least 2 Director and maximum 15 and further can be increased by special resolution. |
1-15 It required At least 1 Director and maximum 15 and further can be increased by special resolution. |
2-Unlimited Minimum 2 designated partners and there is no maximum limit for LLP. |
NA |
NA |
| Separate legal identity | Yes Company has separate legal identity from its subscribers of MOA. |
Yes Being single owner still have separate legal identity from the company. |
Yes LLP has separate legal identity from its partners and designated partners. |
No Partners and the partnership firm are treated as single identity. |
No Proprietor and proprietorship concern have same legal identity. |
| Limited Liability | Yes The liability of Members are limited up to the amount of share capital which is subscribed by them. |
Yes The sole Member of the company is liable only up to the amount of capital introduced by him. |
Yes Designated Partners and Partner’s liability is restricted to the amount of capital contribution as mutually decided at the point of Agreement. |
No Partners are jointly and severally liable for any liability of the firm as their liability is unlimited. |
No Single owner has unlimited liability for any losses or debt in the proprietorship concern. |
| Perpetual Life of the entity | Yes Entity’s life is not based on the shareholder’s life. It continues by changing of the owner’s share. |
Yes In case of death of the shareholder the company is run by the nominee of the company. |
Yes On death of partner or designated partner, Share of them will be transferred to their legal heir but this may not result in dissolution. |
No It does not have perpetual succession as this depends upon the will of partners. |
No Perpetual existence does not exist with the death of the proprietor concern. |
| Annual Statutory Compliance | High Annual Filling of Company, Directors compliance, Audit, Income tax Return, Meeting and other Filling GST compliances. |
High Annual Filling of Company, Directors compliance, Audit, Income tax Return, Meeting and other Filling GST compliances. |
Low Annual Filling, Income tax Return, GST compliance is to be required and Audit is not mandatory. |
Low Income tax Return and GST compliance Audit in case of Turnover crosses the limit. |
Lowest Compliance with Income tax and GST only(if any). |
| Transferability | Yes Shares are easily transferable from one to other. |
Yes Share can be transferred by one person to other but nominee needs to be changed. |
Yes Addition and deletion of partners are possible through change in share of capital contribution. |
Yes Addition and removal of partner is possible new deeds with the changes in capital and profit sharing needs to be done. |
No It cannot be transferred. |
| Foreign Direct Investment (FDI) | Yes FDI is available under automatic route. |
No Single owner hence FDI is not possible and not allowed. |
Yes FDI is permitted subject to prior approval by the central government. |
No FDI is not permitted in partnership firm. |
No Small scale Business organization hence no FDI is permitted. |
