Conversion of Firm Into LLP

OVERVIEW OF CONVERSION OF
FIRM INTO LLP

A Partnership firm works as an unregistered organization on the other hand limited liability partnership is a registered organization its separate legal identity, liability, unlimited no. of partners attract businessman.
Limited liability partnership has combined quality of a partnership as well as companies etc. which makes it attractive in comparison with Partnership firm.
Registration of LLP is on escalation in India because of different factors. According to a survey, Registration of LLP have jumped up in India and planned to take up arms even further with increased awareness and knowledge about LLP.

DOCUMENTS REQUIRED FOR CONVERSION

Partner’s Details

PAN Card & Aadhar card of all partners
Voter id/ Driving License/ passport of all partners
Bank Statement of all partners

Address Proof

Rent Agreement, latest month Electricity bill & NOC of owner(if rented)
Latest month Electricity Bill/ Property tax receipt(if owned)

Details of Proposed LLP

Subscriber Sheet
Consent of designated partner
Name of Proposed LLP

Details of Proposed Partners

Capital Contribution by Proposed Partners
DSC of designated partners
Phone No. and E-Mail ID

Partnership Firm Documents

PAN of firm, if any
Partnership Deed (Init ial & supplementary, if any)
Statement of assets and liabilities of the company duly certified by a CA
ITR Returns Acknowledgement (Most Recent) of Firm

Creditor’s List & Consent

List of creditors with consent for conversion

Approvals/NOC

Approval from any other body/authority may be required
NoC from Income Tax authorities

Additional Documents

Particulars of any court proceedings (In case of any proceedings pending)
Rejection letter of ROC (in case of any earlier conversion application)

ADVANTAGES OF CONVERSION OF FIRM INTO LLP

Less Registration Cost

The cost of registration of LLP is low as compared to cost of incorporation of company.

Better recognition in market

Being a registered form of business with the central government, LLP is having good credibility & recognition in the market.

Limited Liability protection

Unlike partnership firm, partner in LLP is not responsible or liable for another partner’s liability. Also partners have limited liability as per the LLP agreement.

Easy Funding

In comparison to partnership firm, the LLP can easily raise the fund through bank loans, Investors, etc.

ELIGIBILITY CRITERIA FOR CONVERSION OF FIRMS INTO LLP

Permission of all partners should be taken for the conversion.
The limited liability partnership shall consist of the same number of partners as they were in the partnership firm.
If in case they are not willing to continue with the limited liability partnership as partners they may terminate from the post of partner and in the event of admission of a new partner it can be added only after completion of the process of conversion and after the LLP formation.

PROCEDURE FOR CONVERSION OF FIRM INTO LIMITED LIABILITY PARTNERSHIP

Collection of documents

Collection of documents of proposed partners of LLP and documents of firms, along with consent of partners and creditors, if any.

Approval of name of limited liability partnership

Filing of application form for the approval of name of the LLP on the MCA.

Filling & submission of LLP form

Preparation and filing of LLP form for application of conversion of firm into LLP.

Generation of SRN

After successful submission of application forms for conversion. SRN will be generated. This SRN can be used for tracking the status of application.

Issue of Conversion Certificate

After successful approval of the form for conversion form ROC, conversion certificate will be generated.

POST CONVERSION IMPORTANT POINTS

Even after conversion of Firm into LLP, from within 14 days till the expiry of twelve months after the date of registration, must state that the firm was converted into an LLP along with mentioning the name and the registration number (if any) of the partnership firm on every official correspondences such as:

Official Documents of the LLP.
All court proceedings by or against the firm pending, continued, completed and enforced by or against the LLP.
All existing agreements and contracts shall be valid as it was entered into with the converted LLP.

Frequently ASKED Questions

Why Limited Liability Partnership is preferred over partnership firm?

A Partnership firm works as an unregistered organization on the other hand limited liability partnership is a registered organization its separate legal identity, liability liability, unlimited no. of partners attract businessman and also limited liability partnership has combined quality of a partnership as well as companies etc. which makes it attractive in comparison with Partnership firm.

Why Limited Liability Partnership is more popular in today's business environment?

Registration of LLP is on escalation in India because of different factors. According to a survey, Registration of LLP have jumped up in India and planned to take up arms even further with increased awareness and knowledge about LLP.

How assets and Liabilities of partnership firm are affected on conversion of firm into Limited Liability Partnership?

In the event of conversion of Partnership firm into limited liability partnership, all properties including tangible (movable and immovable) and intangible property vested with the firm all assets, interests, rights, privileges, liabilities, obligations of the partnership firm are handed over to limited liability partnership.

Does all the licenses issued to firm can be transferred to Liabilities of partnership?

All the approvals, permit, registration or license granted to the Partnership Firm shall not be transferred automatically to the limited liability partnership and hence new licenses or registrations are required to be applied by limited liability partnership.

A unregistered firm can be converted into Limited Liability Partnership?

A registered partnership firm works according to Indian Partnership Act,1932 and LLP Rules. In case if the firm is not registered under the act of partnership then the name of the Statute under which it is registered is required to be specified at the time of conversion. Unregistered Partnership Firm can’t be converted to limited liability partnership. incorporation of LLP by conversion of Partnership Firm to limited liability partnership must have the same partners as they were in the Partnership Firm earlier.

Does existing partnership firm can be converted into Limited Liability Partnership?

Yes, an existing partnership firm can be converted into LLP on complying with the Provisions of LLP act and LLP rules this leads to dissolution of The partnership firm and Limited liability partnership comes into existence.

Who has the authority to remove the name of firm after conversion of firm into Limited Liability Partnership?

Registrar has the power to remove the name of the partnership firm from Register of the Indian Partnership Act, 1932.

What happens in any property is registered in the name of partnership firm?

If any property is registered on the name of partnership firm then it is required to intimate concerned authority.

What is the liability of partners on conversion of firm into Limited Liability Partnership?

All partners are jointly and severally liable for all the liabilities and obligations of the firm.In case any partner discharges his obligation in the firm, then he shall be reimbursed by the limited liability partnership.

What if, any proceedings are pending in the court during conversion of firm into Limited Liability Partnership?

All the unresolved or existing disputes/ proceedings by or against the firm before any court or Tribunal shall be continued by or against the limited liability partnership. Any order or judgement whether in favour or against the partnership firm applicable as it is to the limited liability partnership.

Do against the decision of the refusal of LLP registration by registraran appeal can be filed?

Yes, in case of refusal of registration of LLP by registrar, appeal can be filed further to tribunal for registration.

Does it is required to apply for name reservation in conversion?

Yes, Partners shall for name approval of LLP in LLP Form RUN to Registrar.

COMPARATIVE START UP STRUCTURE

BASIS OF DIFFERENCE	PRIVATE LIMITED COMPANY Register Now	ONE PERSON COMPANY Register Now	LLP Register Now	PARTNERSHIP FIRM Register Now	PROPRIETORSHIP CONCERN Register Now
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.

CONVERSION OF FIRM INTO LIMITED LIABILITY PARTNERSHIP (LLP)

APPLY NOW FOR CONVERSION OF FIRM NOW