Conversion of Company into LLP
Taxes / Jul 06, 2020
Limited liability partnership was introduced in India through the LLP Act, 2008. The aim of this was to provide the entrepreneur with the benefits of private limited companies as they are easy to maintain. Many LLPs have been incorporated and adopted by the Indian business community. In this article, we will see the procedure followed to convert a company into LLP.
Overview and Essentials
Even though LLP is easier to maintain, it does not provide the same benefits as the company. The reason is that very few companies are reconverted into LLPs which get the advantage of lower compliance necessities associated with LLP. The procedure for the conversion is covered in the third schedule of the LLP Act.
Any company which is willing to convert into LLP should fulfill the requirement that all the shareholders of that company will become partners of that LLP and there would also not be any charge on the assets of the Private Limited company. Before the registration of the company into LLP, these requirements should be fulfilled.
Procedure for the Conversion of Company into LLP
Before the process of conversion starts all the shareholders of the company should provide the Digital Signature Certificate (DSC) and Director Identification Number (DIN). Usually, in a Private Limited Company, only directors will have DIN and not the shareholders. DIN will be provided to all the shareholders before the conversion of the company into LLP and Form 18 should be filled along with prescribed documents. The documents and the information required during the incorporation process are given below.
- All the shareholders of the company should be agreed on for the conversion of the company into LLP.
- Incorporation documents must be provided.
- There should not be any objection certificate from the tax authorities.
- The financial statement of the company should be provided.
- A list of the creditors of the company and their approval for the conversion of the company into LLP should be provided.
If the registrar accepts the application, the certificate of incorporation of the LLP will be given. After the conversion of the company into LLP, the Private Limited Company will be dissolved. All the properties, assets, liabilities, interests, rights and privileges of the company will be transferred to the LLP.
Transfer of License and Property
After the conversion of the company into an LLP, the licenses, approvals, and permits in the name of the company will not be automatically transferred to the LLP. So before starting the process of conversion, the entrepreneur should look into the impact of the conversion process on the existing licenses and registrations of the concerned department.
Again, the property belonging to the company will also be not automatically transferred to the LLP and this also entrepreneur should follow up on with the concerned authorities to effect the transfer of property from the company to the LLP. This should be considered and then the conversion procedure should be initiated if required.
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