Process-Conversion of Private Ltd. Company Into LLP
AS ALL OF US AWARE THAT COMPANIES ACT, 2013 HAS CAME INTO FORCE FROM 01ST APRIL, 2013.
LET’S FIRST DISCUSS BENEFITS OF LLP:
1. TAX BENEFITS
The Most Important Reason for conversion of a company into an LLP is on the tax front.
- LLP are taxed like general partnership firm, they are exempted from surcharge
- Currently, the Income-tax Act, 1961, provides for payment of minimum alternate tax (MAT) as also for payment of dividend distribution tax (DDT) by companies. An LLP should not be liable to pay DDT.
- No Capital Gains tax shall be charged on transfer of property from Company to LLP
2. MINIMAL COMPLIANCE LEVEL & COST SAVING:
After commencement of Companies Act 2013 cost of maintenance is increase in case of Companies. Because there is no need of compliances related to meetings and maintenance of huge statutory records So LLP help to save cost..
3. NO LIMIT ON NUMBER OF SHAREHOLDERS/PARTNERS:
An LLP can have unlimited number of partners. No Limit of Maximum No. of Partners.
4. NO STAMP DUTY:
All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
5. OTHER BENEFITS:
- Easy to manage & run.
- Less Government Intervention
- Easy to dissolve or wind-up
- Audit requirement only in case of contributions exceeding Rs. 25 lacs or turnover exceeding Rs. 40 lacs.
LIMITATIONS of LLP:
- Any act of the partner without the other partner, may bind the LLP.
- Under some cases, liability may extend to personal assets of partners.
- Cannot raise Money from Public.
CHECKS FOR CONVERSION OF COMPANY INTO LLP
- In case of conversion of Private Limited Company into LLP, all the shareholders of the Company to be partners in the LLP. No one else can be partner in LLP
- Also there will be NO SECURITY INTEREST subsisting or in force at the time of application in the assets of the Company.
- Every Designated Partner is required to obtain a DIN from the Central Government.
- All the E-FORMS which are required for the purpose of incorporating the LLP are filed electronically through the medium of Internet, it is not possible to sign them manually. Therefore, for the purpose of signing these forms, the Designated Partner of the proposed LLP needs to obtain a Digital Signature Certificate (DSC) from government recognized DSA’S.
- Whether up to date Income-tax return is filed under the Income-tax Act, 1961.
- Whether any prosecution initiated against or show cause notice received by the company for alleged offences under the Companies Act, 1956.
- Whether any proceeding by or against the company is pending in any Court or Tribunal or any other Authority.
- Whether any conviction, ruling, order, judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting.
- Whether any clearance, approval or permission for conversion of the company into limited liability partnership is required from anybody/ authority. etc
PROCESS OF CONVERSION OF COMPANY INTO LLP
A Private Company may convert into LLP in accordance with the procedure prescribed in the Third Schedule. Process as given below:
1. OBTAIN DIN:
Earlier there was Concept of DPIN, which has been abolished therefore. Now obtain DIN for those designated partners who don’t posses DIN already. (Process for obtaining Din given in my earlier Article).
2. BOARD MEETING:
- Call meeting of board of Director.
- Pass Resolution for Conversion of Company into LLP.
- Pass Resolution to authorize any director to Apply for Name of LLP.
3. APPLICATION FOR NAME AVAIBILITY:
File e-form INC-1 with ROC.
Attachments: Board Resolution Board resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form
4. Obtain name Approval Certificate from ROC.
5. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:
Contents of Agreement are:
- Name of LLP
- Name of Partners & Designated Partners
- Form of contribution
- Profit Sharing ratio
- Rights & Duties of Partners
- Proposed Business
- Rules for governing the LLP
It is not necessary to have the LLP Agreement signed at the time of incorporation, as the details of the same needs to field in eform 3 within 30 days of incorporation but in order to avoid any dispute between the partners as to the terms & conditions of the agreement after the conversion into LLP.
6. FILLING OF INCORPORATION DOCUMENTS:
File E-Form- 2 with ROC along with following ATTACHMENTS:
- Proof of Address of Registered office of LLP.
- Subscripttion sheet signed by the promoters.
- (Notice of Consent & Appointment of Designated Partners with their personal details)
- Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner
7. FILLING OF APPLICATION FOR CONVERSION:
File E-FORM- 18 with ROC along with following ATTACHMENTS:
- Statement of shareholders.
- Incorporation Documents & Subscribers Statements in Form 2 filed electronically.
- Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.
- List of all the Secured creditors along with their consent to the conversion.
- Approval of the governing council (In case of professional private limited companies)
- NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.
- Approval from any other body/authority as may be required.
- Particulars of pending proceedings from any court/Tribunal etc.
- After all formalities and filings been complied with by the applicants and approved by the Ministry, REGISTRAR OF LLP TO ISSUE A CERTIFICATE OF REGISTRATION in form no. 19 as to conversion of the LLP. The Certificate of Registration issued shall be the conclusive evidence of conversion of the LLP.
9. FILLING OF E-FORM-3:
This form provides information in respect to the LLP Agreement entered into between the partners.
ATTACHMENT: LLP Agreement
10. CERTIFICATE OF INCORPORATION AS LLP FORM ROC.
11. FILLING OF E-FORM-14: (INTIMATION TO ROC)
After Receiving Incorporation Certificate Limited liability partnership to file within 15 (fifteen) days of the date of registration, information to the concerned Registrar of Companies with which it was registered under the provisions of the Companies Act, 2013 (1 of 2013) about the conversion and of the particulars of the limited liability partnership in eForm 14 within 15 days of conversion into LLP.
ATTACHMENTS OF E-FORM 14
- Copy of Certificate of Incorporation of LLP formed.
- Copy of incorporation document submitted in Form 2
STEPS OF CONVERSION:
| S. NO. |
PARTICULAR |
REQUIREMENT |
| 1. |
Apply for Din No. |
e-form DIR-3 with ROC-Process given in my earlier article |
| 2. |
Call BM- to change name – ending with word LLP |
|
| 3. |
File Form for Name approval with work LLP |
E-form INC-1(Attached Board Resolution) |
| 4. |
ROC issue name approval certificate |
|
| 5. |
Incorporation documents with registrar |
File e-form -2 ( Attached Incorporation Documents) |
| 6. |
Application of Conversion |
e-form – 18(Attached Given Below) |
| 7. |
LLP Agreement- within 30 days of approval of above forms |
e-form- 3(Attached LLP Agreement) |
| 8. |
If incorporation certificate is issued by department; then |
|
| 9. |
Intimation of Conversion to Registrar |
e-form-14(Attached Given Below) |
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