Proprietor into LLP
Limited liability partnership in India was introduced through the LLP Act, 2008. The fundamental idea behind adopting LLP was to provide a structure that is easy to maintain and reduces the liability as compared to a sole proprietorship structure. LLP consolidates the benefits of both the Company and Partnership firm into a single form of organization and offers a hybrid structure. Hence, the change of sole ownership into LLP is a decent business choice. Under LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. LLP also provides limited liability protection for the owners from the debts of the LLP. Accordingly, LLP is favored for the most part by Professionals, Micro, and Small organizations that are family-possessed or intently held.
Benefits of conversion from proprietorship to LLP
Separate Legal Existence
A limited liability partnership is a separate legal entity, and its existence is separate from its partners, unlike the general partnership firm. This makes it possible to own assets and enter into contracts in the name of the LLP or use a third-party/outsider in case of any dispute.
Limited Liability of Owners
The obligation of Partners is limited to the extent of capital contribution agreed by the partners in the LLP Agreement. The loss or debt of LLP cannot be allocated to partners even while the dissolution of LLP. Further, one partner is not held responsible/ answerable for the actions or negligence or misconduct of any other partner
Flexibility to Operate
The LLP is managed and run according to the LLP agreement. It’s the partners that decide how the LLP would function and divide the duties and responsibilities. Hence, it is a very adaptable structure and the partners allowed to make their own standards/rules of management which is not possible in other business structures
Lower Compliance Requirement
Compared to a Private Company, there is a lower compliance requirement in the case of LLP, including the audit requirement. The requirement of a statutory audit arises on reaching a certain level of turnover or contribution. Further, provisions such as the meeting of partners, operation through resolutions are relaxed and not mandatory in every case.
Documents required converting into LLP
PAN Card – Pan is a mandatory document while converting the business needs across formats. This should include the PAN Card of every partner of the business who is a part of the LLP (Foreign nationals may supply their passport).
Address Proof – Each of the partner’s address proof is to be submitted in the process to convert a business from a sole proprietorship to an LLP. This address proof can be in the formats such as Aadhar card or Voter ID or Passport or Driving License.
Photograph – A recently taken image of every one of the partners in the LLP list. The photo shall be in the form of formally dressed and groomed, the size of this picture must be a passport size.
Business Address Proof – You must submit the organization address and it could in any of these formats such as an electricity bill or phone bill.
Rent/ Lease agreement – If the registered office of your business is in a rental building, you should provide a rental agreement and No Objection Certificate from the owner/ proprietor.
NRI/ Foreign National – If any of your partners is either an NRI or a foreign national, all the documents of the partner should be notarized.