What is the conversion process Partnership into an LLP
In recent years, there has been a notable transition from conventional partnerships to Limited Liability Partnerships (LLPs). This trend can be attributed to enhanced flexibility and the inclusion of unlimited partners, among other benefits offered by LLPs. However, the primary impetus behind this shift lies in the significant advantage LLPs provide in terms of limited liability. By blending elements of both partnerships and private limited companies, LLPs alleviate the burden on partners’ personal assets, making them an appealing choice. Particularly for small and medium-sized enterprises, this organizational structure proves highly conducive to their requirements.
The benefits of adopting the Limited Liability Partnership (LLP) model outweigh those associated with traditional partnerships. Limited liability, perpetual succession, and the ability to have unlimited partners stand out as compelling reasons for partnership firms to undergo the conversion process into an LLP.
Why Opt for LLP Rather Than a Partnership Firm?
Besides the fundamental disparities, several attributes render LLPs a more appealing choice over standard partnership firms:
- Perpetual Succession: In contrast to traditional partnerships, the dissolution of a partner does not impact the continuity of an LLP. The LLP’s distinct legal entity enables it to continue its operations unabated even in the event of a partner’s demise.
- Multidisciplinary LLPs: LLPs offer the unique advantage of facilitating collaboration among professionals from diverse fields. This inclusive feature presents opportunities for professionals of various disciplines to work together within the LLP structure, thus leveraging collective expertise and fostering synergy.
- Investment Allure: LLPs are viewed by foreign investors and venture capital funds as attractive investment prospects due to their corporate structure and enhanced organizational framework compared to traditional partnerships.
- Freedom of Management/Flexibility: LLPs grant partners a considerable degree of freedom in managing operations and overseeing day-to-day activities. The LLP Agreement is not heavily bound by the Limited Liability Partnership Act, 2008, allowing for greater flexibility in its formulation.
Partnership Firms vs. LLPs
The following table will define the key difference between a partnership and an LLP:
| Basis | Partnership | LLP |
|---|---|---|
| Liability | Unlimited: In traditional partnerships, the personal assets of the partners are fully liable for the obligations and debts of the business. | Limited: In LLPs, the liability of partners is restricted to the extent of their capital contributions to the LLP. |
| Separate Legal Entity | No | Yes |
| Number of Members | Maximum 20. The maximum number is 10 in the case of banking business. | There is no restriction on the maximum number of partners that can be involved in an LLP. |
| Digital Signature Certificate (DSC) | No such requirement. | Every designated partner of the LLP is required to possess a Digital Signature, which serves as a mandatory prerequisite for electronic filing (e-filing) purposes. |
| Books of Accounts | Not mandatory. | The LLP Agreement should be drafted in accordance with the provisions outlined in the LLP Act. |
We provide Custom Solutions for your legal problemns
Contact us
Security, Confidente & Reliable Solutions
Contact us
Calculate all your liabilites and pay as well
Contact us
Requirements for Converting a Partnership Firm to an LLP
- The process of converting a partnership firm to an LLP must adhere to the guidelines specified in Section 55 of the Limited Liability Partnership Act 2008, in conjunction with Schedule II of the Act.
- All partners of the partnership firm automatically become partners of the LLP, implying that no new partners can be introduced nor can existing partners cease to be partners during the conversion application process.
- It is obligatory for all partners to possess a valid Digital Signature Certificate (DSC), and at least two partners must acquire a Designated Partner Identification Number (DPIN) before initiating the conversion application.
- Consent from all partners involved in the partnership firm must be obtained prior to the conversion process.
- The partnership firm seeking conversion must be duly registered under the Partnership Act, 1932.
- Director Identification Number (DIN) or Designated Partner Identification Number (DPIN) must be procured for all Designated Partners involved in the LLP.
- The LLP must maintain identical partners as the original partnership firm. However, any partner wishing to withdraw from the LLP may do so after the conversion process has been completed.
Expert guidance
Dedicated team
Client satisfaction
Ongoing support
Transparent processes
FAQ’s for Convert Partnership Firm to LLP
- Secure digital signatures from all partners
- Apply for DIN for each partner
- Submit the RUN-LLP Form via the MCA website
- Complete the Fillip form for conversion application
- Officially register the LLP agreement on the MCA website
- Obtain the Certificate of Incorporation for your LLP.
LLP conversion is not allowed for both registered and unregistered Partnership Firms.
Form 8 must be used to submit the Account and Solvency statement from the foreign LLP. This form should be completed within 30 days after the first half of the fiscal year has concluded. The outstanding balance is ₹ 1000.
Each year, the Registry of Companies (RoC) expects to receive a Yearly Return and Statement of Earnings from an LLC.
Within the framework of an LLP, a partner serves as a member, whereas a designated partner bears the responsibility of adhering to the LLP Act and carrying out supplementary legal obligations. These obligations encompass the upkeep of accounting records and the submission of relevant documents to the RoC.
The key advantage of changing a partnership firm to LLP is that partners’ liability becomes limited. This protects partners from being personally responsible for the debts and obligations of the LLP beyond their capital contributions.