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LLP TO COM [f]

Limited Liability Partnership

An LLP is a unique form of legally recognized business vehicle, which integrates flexibility of a traditional partnership firm with the advantages of Separate Legal entity. As it contains the features of both Company and Partnership, it is rightly been called the HYBRID Entity.

LLP is governed by Limited Liability Partnership Act, 2008 which came into force on 1st day of April 2008. This Act was introduced with the idea of promoting MSME Sector (Micro Small Medium Enterprises) with the advantages of self governance and less compliances.

When LLP firm converted into company then no capital gains arise to the firm. Because at the time of conversion under Part IX of the Companies Act, 2013 the properties of the firm remains in the limited company as they exist. There is no dissolution of the LLP firm. Therefore section 45 (1) of the Income Tax Act of capital gains is not applicable in this case.

To get the tax benefits the same shareholding of the partners before conversion is to be maintained the former partners of LLP cannot have a total shareholding which is to be less than 50 percent for consecutive five years in the newly formed private limited company.

Increased Cost of Legal Compliance.

Every company is required to get its books audited at the end of the financial year, and file ROC Returns after holding the annual general meeting of the company. For the companies which are doing good business & growing, the audit and statutory disclosures are in a way useful to protect the interest of the shareholders of the company. However, where the number of transactions is meager & in some cases where the company is in losses, the legal cost of compliance is high if you compare it with an LLP Form of business. Hence, where the scale of operations is going to be less, then we recommend registering an LLP.

List of Documents required filing with ROC for conversion of LLP into Company:

E-form URC-1

Company required filing e-form URC- 1 along with all the below mentioned documents:

i. A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them

ii. a list showing the particulars of persons proposed as the first directors of the company

iii. an affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub-section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief

iv. a list containing the names and addresses of the partners of the Limited Liability Partnership

v. Copy of LLP Agreement

vi. a statement of assets and liabilities of the Limited Liability Partnership duly certified by a chartered accountant in practice which is made as on a date not earlier than thirty days of the filing of form no.URC-1

vii. a copy of latest income tax return of the Limited Liability Partnership

viii. an undertaking that the proposed directors shall comply with the requirements of Indian Stamp Act, 1899 (2 of “1899)

ix. written consent or No Objection Certificate from all the secured creditors of the applicant

x. written consent from the majority of Partners

xi. a statement specifying the following particulars:—

♦ the nominal share capital of the company and the number of shares into which it is divided;

♦ the number of shares taken and the amount paid on each share;

♦ the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof;

All about Limited liability partnership

Limited Liability Partnership

LLPs are in law regarded as ‘bodies corporate’ and are subject to aspects of company law, but for tax they will generally be treated as ‘partnerships’. The members provide working capital and share any profits. Members who are individuals will be liable to pay income tax under self assessment, and self-employed Class 2 and Class 4 National Insurance contributions. Members who are companies will be liable to pay corporation tax on their share of profits.

The members of an LLP have limited liability, but the LLP is liable for all its debts to the full extent of its assets. To the extent that the members have contributed to those assets, a member risks losing that amount should the creditors claim those assets.

An LLP has unlimited capacity which means that third parties need not be concerned about any restrictions or activities.

Disadvantages of  the Limited  liability  partnership

Inclusion of Indian Citizen as a Partner – An NRI/Foreign national who wants to incorporate an LLP in India shall have at least one partner who is an Indian citizen. Two foreign partners cannot form an LLP without having one resident Indian partner along with them.

Transfer of Ownership –If a partner wants to transfer his/her ownership rights then he/she has to obtain the consent of all the partners.

Filing of various returns – Public disclosure is the main disadvantage of an LLP. An LLP must file Annual Statement of Accounts & Solvency and Annual Return with the Registrar each year. Income Tax Return must also be filed to the Income tax department for the LLP.

Number of partners –A limited liability partnership must have at least two members. If one member chooses to leave the partnership, the LLP may have to be dissolved.

Non- recognition – LLPs are limited by state regulations due to which they are not given due recognition in every state as a business structure.

Huge penalties –The cost of non-compliance of procedural matters such as late filing of e-forms is very high which would lead to huge sum of penalties owing to Rs.100 for every day till the time the offence of late filing continues.

Basic

INR 1,500/-

One Time Fee

  • GST Registration
  • MSME Registration
  • Bank A/c.

Service Provide Within 7 Days

Standard

INR 11,999/-

One Time Fee

  • GST Registration
  • Shop & Establishment Registration
  • MSME Registration
  • Trade Mark Registration
  • Logo Design
  • Opening Bank A/c.

Service Provide Within 15 Days

Premium

INR 11,999/-

Yearly Fee

  • Yearly GST Compliances
  • Income Tax Return

Services Provided Before the Due Date

Frequently Asked Questions

Two or more partners are also converting the existing LLP into private company and in the case of public company minimum 3 partners or more can convert LLP into public company

When LLP firm converted into company then no capital gains arise to the firm. Because at the time of conversion under Part IX of the Companies Act, 2013 the properties of the firm remains in the limited company as they exist. There is no dissolution of the LLP firm. Therefore section 45 (1) of the Income Tax Act of capital gains is not applicable in this case.

To get the tax benefits the same shareholding of the partners before conversion is to be maintained the former partners of LLP cannot have a total shareholding which is to be less than 50 percent for consecutive five years in the newly formed private limited company.

In case of more than 7 partners in the LLP at the time of conversion into Company then Company have to file Scan copy of physically prepared MOA & AOA.

In above mentioned situation company have to file 1. URC-1 and 2. INC-32. No need of INC-33 and INC 34 in the above mentioned situations.

Maximum 3 (Three) DIN can be apply through SPICE form.

If applicant want to incorporation Company with more than 3 Directors and more than 3 persons doesn’t have DIN. In such situation applicant have to incorporate Company with 3 Directors and have to appoint new directors later on after incorporation.

No need to file any separate form. Details in relation to Area Code and other details shall be mention in the form INC-32 itself and PAN & TAN shall be generating with Certificate of Incorporation.

Yes approval of name is mandatory, to get the name approved from the ROC, one needs to submit RUN (Reserve Unique Name) form which is in e-format. Various items are to be filled in while submitting the RUN form.  Also, the name which is approved by the ROC is available for use only for twenty days in case of a new company and sixty days in case of change of name of existing company.

In case of incorporation of a company where any of the subscribers of the MOA/AOA is signing at a place outside India, MOA & AOA shall be filled with INC 32 in the respective format as specified in Table A to J in Schedule I without filing form INC 33 and INC 34. (Means Physical attachment of MOA & AOA in e-form INC 32