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COMPANY TO LLP

Limited Liability Partnership

LLP works like a corporate body entity we can include both Company and Partnership. It is especially suitable for small to medium-sized business enterprises (SMEs).

It is ruled by Limited Liability Partnership Act- 2008 which came into force on April 1, 2008.  This Act was proposed for small business who wants to work the business like corporate body entity with lesser compliances.

Advantages of Conversion of Company to LLP.

  1. The important advantage of an LLP is that LLP is easier to start and manage and the process has lower formalities.
  2. It has a low cost of registration as compared to a Company.
  3. LLP is a separate body.
  4. LLP has no minimum requirement for capital.
  5. The partners would have limited liability to their agreed contribution in the LLP.
  6. No requirement for compulsory Audit.
  7. Annual compliance is lesser than companies.
  8. Non-applicability of MAT.
  9. Profits can be distributed without any cost of Distribution Distribution Tax (DDT).
  10. Audit not mandatory.

Disadvantages of Conversation of Company to LLP 

  1. Not able to raise venture capital funding
  2. Rights of partners
  3. Greater penalties
  4. Filing of various returns
  5. Non- recognition 

DOCUMENTING OF APPLICATION FOR CONVERSION INTO LLP

Conversion of a company into an LLP can be done thought-form 18 filings to ROC

Following important document required for conversion of the company into LLP such as:

All shareholder’s approval through their consent is mandatory of the company for the conversion of a company into the LLP.

The entire shareholder would be partners in the proposed LLP.

Compliance under the income tax act is mandatory by filing ITR up to date.

All updated latest document (Like, Balance sheet & Profit & Loss, and other necessary documents should be available while conversion into LLP

Any other preceding against or in favor of the company name will automatically transfer to the LLP or running against the LLP.

NOC should be taken from the secured Creditors of LLP.

All about Limited liability partnership

Limited Liability Partnership

LLP works like a corporate body entity we can include both Company and Partnership. It is especially suitable for small to medium-sized business enterprises (SMEs).

It is ruled by Limited Liability Partnership Act- 2008 which came into force on April 1, 2008.  This Act was proposed for small business who wants to work the business like corporate body entity with lesser compliances.

DOCUMENTING OF APPLICATION FOR CONVERSION INTO LLP

Conversion of a company into an LLP can be done thought-form 18 filings to ROC

Following important document required for conversion of the company into LLP such as:

All shareholder’s approval through their consent is mandatory of the company for the conversion of a company into the LLP.

The entire shareholder would be partners in the proposed LLP.

Compliance under the income tax act is mandatory by filing ITR up to date.

All updated latest document (Like, Balance sheet & Profit & Loss, and other necessary documents should be available while conversion into LLP

Any other preceding against or in favor of the company name will automatically transfer to the LLP or running against the LLP.

NOC should be taken from the secured Creditors of LLP.

TAX ASSESSMENT ON CONVERSION OF COMPANY INTO LLP

The effect on the taxation system after conversion from Company to LLP is there is no capital gain tax while on conversation will not consider as transfer as per definition of transfer under Income tax Act-1961, subject to the following condition.

The impact of conversation on all assets and liabilities of the Company will become the assets and liabilities of the LLP.

The impact of conversation all the shareholders of the Company must become partners of the LLP

After conversation ratio of shareholding of the company would be the same consider in LLP for the capital contribution ratio and the profit-sharing ratio of partners

No indirect benefit would be allowed to the shareholders in the LLP, except by way of capital contribution and profit-sharing ratio.

The total sales, gross receipts, and turnover in any of the three preceding years from the date of the conversion does not exceed Rs. 60 Lacs.

The total value of assets as appearing in the books of account of the Company in any of the previous three years does not exceed Rs. 5 crores.

IMPACT OF CONVERSION 

There are some implications due to this conversation are as following:

The private company would be wind up after conversion.

Removals of the name of the company from register of the ROC.

All the existing liabilities, obligations, agreements, contracts, and continued employment would not affect by this conversion.

The company has to inform all the authorities’ concerned authorities about the conversion and make necessary changes in all the registrations and licenses.

FAVORABLE CIRCUMSTANCES OF CONVERSION

 

Conversation of assets into LLP, and there is no instrument of transfer is required and saving of stamp duty.

No limit to introduce no of partners

No compulsory holding the meeting and maintaining statutory records

Frequently Asked Questions

 A company may apply to convert into LLP only if-

  • All the assets of the company are charge free at the time of filing of an application for conversion; and
  • All the shareholders of the corporate body ( company) must become partners of LLP.

The following provision will be applicable for the conversion of the company into LLP.

  • Section 56 of the LLP Act, 2008;
  • Rule 39 of LLP Rules, 2009 and
  • Schedule 3 of LLP Act, 2008.

Yes, Consent of all the creditors should obtain and it is mandatory for conversion of the Company into LLP.

Yes, Consent of all shareholders must be taken and it is mandatory for converstion.

Yes, the LLP shall inform ROC by form 14 within 15 (Fifteen) days from the date of conversion

Every official correspondence of the LLP bears the following for the period of 12 months:

(a) a statement that it was converted from a private company into an LLP w.e.f……… (Date of Conversion); and

(b) the name and registration number of the company from which it was converted.