Conversion of Company into LLP

Overview

Company being governed by companies Act 2013 has many regulatory compliance such as Audit of financial statement, minimum number of meetings, maintenance of statutory records etc. and LLP has less compliance as compared to company. LLP is also registered business organization so company whose turnover is reducing regularly but to expand its business and want its compliances to be minimum then LLP is the best form of organization.

Overview
Procedure

Procedure for Conversion of Company into LLP

  • CONVENE BOARD MEETING - A Board Meeting shall be duly Convened to Pass Necessary Resolution for: -
    1. Approving the proposal for Conversion of Company into LLP
    2. Authorizing any Director to apply for name of LLP
  • OBTAIN DPIN & DSC -
    • Acquire Digital Signature (class 2) of the proposed designated partners (Atleast 1 DSC is required for Signing the Application)
    • Designated partner if does not hold DIN then will be allotted through filling Fillip form (Maximum 2) and for rest(if any ) separate application is required for obtaining DPIN.
  • APPROVAL OF NAME - Check availability of name and get approval in RUN Form for LLP.
  • FILE FILLIP FORM - File Form FiLLiP i.e. form for incorporating LLP with other below mentioned forms and documents with the Registrar of Companies :
    • Proof of registered office address of LLP
    • Subscribers’ sheet including consent
    • Aadhar Card and PAN card of all the partners other than designated partners self-attested
    • Proposed Main Object clause
    • Approval of regulatory authority, if required
    • Detail of LLP and/ or company in which partner/ designated partner is a director/ partner (if any).
  • FILING OF APPLICATION FOR CONVERSION -
    • E-form 18 is required to be filed in case of conversion of existing company into LLP. This form should be filed together with the incorporation form.
    • Before filing this form following should be ensured.i.e. minimum requirements for conversion of company into LLP:
    Company should not be section 8 company.
    No unsatisfied charges should be pending against the company.
    Company should be having share capital.
    No forms should be pending for payment or processing in respect of company.
    All the shareholders of the company becomes partners of the LLP
    At least one balance sheet and annual return should have been filed by the company after its incorporation.

    Following documents should be attached with e-form 18:
    Copy of acknowledgement of latest income tax return.
    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.
    Statement of consent of shareholder.
    Any other information can be provided as an optional attachment.
  • CERTIFICATION OF REGISTRATION -
    Registrar after satisfying himself about completeness in documents and various compliances, issue certificate of incorporation.
    • In case of any discrepancies found in the form, then it is needed to be resubmitted and uploaded again with satisfying the remarks by MCA.
  • INTIMATION OF CONVERSION TO ROC -
    • After receiving Certificate of Incorporation of LLP, the LLP is required to file form 14 to the ROC within 15 days of issue of certificate of incorporation for intimating about its conversion into LLP.
    • Following document should filed along with this form:
    Copy of the certificate of incorporation of LLP is a mandatory attachment.
    Any other information can be provided as an optional attachment.
  • POST INCORPORATION COMPLIANCE - • Within 30 days of the incorporation file Form 3- LLP Agreement with the signed and stamped, notarized LLP Agreement.

Documents Required for Conversion of Company into LLP

  • PAN Card and Aadhar card (Mandatorily Required) of the Partners/Designated Partner
  • Identity Proof of the Partners/ Designated Partners (Voter id/ Driving License/ passport-anyone)
  • Address Proof of the Partners/ Designated Partners( Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
  • Electricity Bill of the proposed Registered Office of the LLP (In case of owned)
  • No-Objection Certificate from the Landlord, electricity bill and Rental Agreement Copy between the LLP and the Landlord (In case of Rented Office)
  • Subscriber Sheet
  • Consent of designated partner
  • DSC of designated partner
  • Name of Proposed LLP
  • Capital of Proposed LLP and capital Contribution of Proposed Partners
  • Phone No. and E-Mail Id of Proposed Partners
  • Copy of acknowledgement of latest income tax return
Documents Required
Minimum Requirement

Minimum Requirement for Registration

  • Minimum 2 Partners.
  • Minimum 2 Designated Partners.
  • At least 1 of the designated partner must be an Indian Resident.
  • If a body corporate is a partner, it has to nominate a natural person as its nominee
  • No Minimum Capital Requirement.
  • DPIN (Designated Partner Identification Number) for all the Designated Partners.
  • DSC (Digital Signature Certificate) for one of the Designated Partner.
  • Copy of acknowledgement of latest income tax return
Advantages

Advantages of Conversion of Company into LLP

  • Compliance Requirements: : LLP is not required to conduct minimum number of meetings in a year and it is not required to maintain statutory records.
  • If private company is converting into LLP then it has the advantage to have any number of partners in LLP in contradiction to have limited number of members in case of private company.
  • Tax Benefits: If conversion fulfills the conditions as specified by income tax act then LLP is allowed to set off and carry forward losses and unabsorbed depreciation of the company. And the LLP is not required to Dividend Distribution Tax as applicable in case of company.

Impacts of Conversion from Company to LLP

Following are some of the impacts of conversion of Company into LLP:



  • The company shall stand dissolved on its conversion into LLP.
  • All the assets, liabilities, obligations, rights, contracts, etc. of the company shall not be affected due to its conversion.
  • In case of properties on the name of the company will be transferred to LLP after notifying the details of conversion to concern authorities by LLP.
  • The name of the company shall be removed by ROC from Register of companies after receiving intimation of conversion.
  • Any approvals, permit, registration or license issued to the Company will not be transferred automatically to the LLP and hence fresh licenses or registrations is required to be applied by LLP.
Impact
Taxation

Taxation on Conversion from Company to LLP

Section 47 of the Income Tax Act, 1961 provides for certain transaction which is not regarded as transfer therefore no capital gain tax shall arise on them. As per this section transfer of capital assets or intangible assets by private company or unlisted public company to LLP shall not be regarded as transfer for capital gain if it satisfies following conditions:






  • All the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership.
  • All the shareholders of the company immediately before the conversion become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion.
  • The shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership.
  • The aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than 50% at any time during the period of 5 years from the date of conversion.
  • The total sales, turnover or gross receipts in the business of the company in any of the 3 previous years preceding the previous year in which the conversion takes place does not exceed 60 lakh rupees.
  • No amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of 3 years from the date of conversion.
  • The total value of the assets as appearing 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 does not exceed 5 crore rupees.

Subscribe Our Newsletter

Get useful latest news & other important update on your email.