What is the procedure for conversion of partnership to LLP?

Initially, people prefer to establish a partnership firm because it is simple to set up and requires the least regulation and expense. They then seek to convert their current partnership enterprises into Limited Liability Partnerships (LLP) to legitimize the organization when the company grows or if a disagreement emerges between the partners. For various causes, including those already indicated, the same tendency has recently accelerated significantly.

Also read LLP Registration Procedure in India. 

1. There is no restriction on the number of partners.
2. When comparing a Limited Liability Partnership to a partnership firm, the liabilities of partners is restricted to the extent of capital invested. This is the major advantage of a Limited Liability Partnership over a partnership firm.
3. The limited liability partnership (LLP) is a legal entity with a more defined company structure and continuous succession.
4. Limited liability partnerships (LLPs) have greater creditworthiness than partnerships because their accounts and financial records are available for public examination on the MCA site.
5. It provides complete autonomy in the management of the company.
6. Foreign Direct Investment (FDI) in limited liability partnerships (LLPs) is relatively easy to get, although this is not the case in partnerships.
7. Limited liability partnerships (LLPs) can use the different Start-up India Schemes sponsored by the state and profit from taxation rebates, and other incentives.
8. Because the Rule of Agency concept does not apply to LLPs, the partners are not accountable for the actions of their fellow partners, making LLPs a more secure option for conducting business operations.

REGULATORY FRAMEWORK FOR CONVERSION OF FIRM INTO LLP:-

1. Section 55 of the LLP Act, 2008 read with Rule 38 of LLP Rules, 2009
2. Schedule 2 of LLP Act, 2008

ELIGIBILITY FOR CONVERSION: – An existing partnership firm may apply to transform into an LLP provided all of the partners of the LLP into which the partnership is to be transformed are also partners of the existing partnership firm.

Also read Advantages of LLP Registration. 

OTHER IMPORTANT POINTS TO KEEP IN MIND BEFORE COMPLETING THE APPLICATION INCLUDE:

1. To convert a partnership, all partners must agree in writing to the conversion.
2. In addition, each partner should contribute to the LLP in the same ratio as their capital accounts were recorded in the books of the company.
3. The partnership firm is required to file Income Tax Returns that are up to date;
4. There must be at least one designated partner who is a resident of India.
5. Before submitting a conversion application, it is necessary to gain the permission of all secured creditors.
6. It is necessary to get the Digital Signature of at least one Designated Partners to complete the transaction.
7. If previous approval or NOC is required from the relevant department, the firm shall obtain it.

PROCEDURE FOR TRANSFORMING A PARTNERSHIP FIRM INTO A LIMITED LIABILITY COMPANY

STEP 1: – Reservation of Name Complete the web-based RUN LLP form to reserve the name of the prospective limited liability partnership. As an additional element to include, the terms LLP  should be included after the name of the partnership firm. The approved name is only valid for 90 days from its approval unless otherwise specified.

STEP 2:- Filing of the Articles of Incorporation, i.e. eForm FILLIP After the proposed LLP's name has been approved, the eForm FILLIP must be filed with the following attachments, in addition to the requisite documents: -

• A utility bill from the registered office (not older than two months), as well as the NOC,
• Signed Subscribers Sheet is required.
• Consent of all the partners is required.
• All subscribers must provide proof of their identity and address.
• A copy of the letter of intent from an existing partnership Information about the LLP/company in which the partner/DP is a Director/Partner

STEP-3:- Submitting eForm 17. The partners must apply conversion in eForm 17 along with the following attachments: –

• Statement of Assets and Liabilities of the firm duly certified by a CA in Practice;
•  List of Creditors with their consent for conversion;
• Consent of all partners for conversion;
• Approval from any other body/authority as may be required;
• Statement of Partners in the format as mentioned in Schedule II;
• Copy of Acknowledgement of Latest Income Tax Refund;
• Copy of Acknowledgement

STEP-4: Approval/Sent for Re-submission of the document in case of rejection by the Triunal. Upon approval, the Registrar will issue a Certificate of Incorporation to the business entity concerned. In the event of a denial by the Registrar, an appeal may be filed with the Tribunal, which has jurisdiction over the matter.

STEP-5: The Registrar of Firms receives notice of completing Step 4. The LLP must notify the registrar of firms of the conversion within 15 (fifteen) days of the date of conversion by filing Form-14 with the registrar of firms and attaching the necessary documents:

• A copy of the LLP's Certificate of Incorporation;
•  A copy of the LLP's Incorporation paperwork has been submitted.

It should be emphasised that Form 14 is a physical form that must be submitted to the Registrar of Firms by completing it physically, signing it, and mailing it to the address listed on the form.

STEP-6:- Submittal of Form LLP-3 (Limited Liability Partnership Agreement): Final step is to file eForm LLP 3 with the Registrar within 30 days of the date of conversion of the firm into a limited liability partnership, i.e., the date on which the certificate of incorporation is issued with the LLP Agreement attached. Once the LLP is formed following the conversion of the Partnership Firm, the Partnership Firm will be regarded to have been dissolved by the courts. The firm's properties, assets, interests, rights, privileges, responsibilities, and duties are all transferred to the LLP upon the conversion of the partnership into a limited liability partnership (LLP). Or, to put it another way, the LLP assumes full responsibility for the entire firm's project.

Also read Limited Liability Partnership (LLP).