Partnership firm to LLP
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why to convert from Partnership firm to LLP?
There are various business structures to carry out a business activity. As an entrepreneur, you have to choose by analysing the benefits, requirements, disadvantages, compliance, etc. of the business structure. Talking about a partnership firm in India, one of the biggest drawbacks of this business structure is the unlimited liability of its partners. This feature leads the personal assets of the partners at risk.
To avoid such trouble, a new concept known as “Limited Liability Partnership or LLP” was introduced in India in April 2009 under the Limited Liability Partnership Act, 2008 featuring limited liabilities of the partners. It is a combination of both a partnership and a company. Thus, LLP is becoming popular as it has features of 2 business structures, i.e. A partnership and a company.
Table Of Contents
Advantages of LLP
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Easy to incorporate:
The forming of LLP is not time-consuming and complicated, unlike company incorporation -
Limited liability:
Unlike a partnership firm, here, the partners are not personally liable for the debts of the firm. This is one of the most attractive features of LLP for entrepreneurs -
Perpetual succession:
LLP remains unaffected due to the death of a partner, insolvency of partner or retirement of any partner. LLPs can wind-up only as per provisions of LLP Act, 2008 -
Different legal status:
LLPs enjoy a separate legal status, unlike a partnership. Hence LLP can purchase an asset or enter into a contract in its registered name. Further, LLP can even sue and can also be sued -
No distinction between ownership and management:
Though many features of LLP are similar to a company, however LLP does not differentiate between its owner and its manager like a company. Hence the partners of LLP can still enjoy the feature of managing the business, while also being the owner of the company
Disadvantages of LLP
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Greater penalties:
Though the compliances of LLP are minimal, if those compliances are not completed, then you may end up paying higher fines than that would be charged to a company. However, not need to worry, at ICI, we can assist you in all the required compliance of LLP to get completed within respective due dates -
Difficulty to raise funds:
The owners and the managers being the same person just like a partnership firm but the liability of the partners being limited, the joint ventures may not choose to invest in a Company than LLP
Critical features of LLP
- The minimum requirement of partners to convert into LLP remains the same, i.e. two partners. Moreover, there is no maximum limit for the number of partners, unlike a partnership firm and a Private Limited Company
- No minimum capital required unlike the Private and Public Limited Company where minimum authorized share capital is Rs. 1,00,000/- and 5,00,000/- respectively
- At least one designated partner of LLP has to be an Indian-resident
- DPIN for all partners is required just like DIN is required for directors of a company
- DSC for the designated partners of LLP
- The registered office of LLP need not mandatorily be in a commercial area. Even a rented house can be the registered office provided the landlord has given an NOC
- As per FDI regulations, foreign investors are allowed to make 100% FDI in LLP which operate in activities/sectors where 100% FDI is considered permissible through the channels of the automatic route
Documents required for such conversion
For Designated Partners:
Identify the two designated partners (or more) and submit their documents as given below.
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Identity Proof
▪ Scanned copy of PAN Card (Indian Nationals) or Passport (Foreign nationals)
▪ Scanned copy of Driver’s License/Passport/Voter ID/Ration Card/Aadhar ID -
Proof of Residence
Scanned copy of Bank Statement (latest)/Mobile Bill/Electricity Bill - Scanned Passport size photograph attached with specimen signature. (i.e. signature on a blank document)
For Registered Office
- Registered document of title of the premises or notarized copy of lease/rent agreement in the name of the company
- Scanned copy of rent paid receipt not older than one month (if rented)
- NOC from landlord to use the place by the company as its registered office
- Scanned copy of utility bills such as telephone bill/gas/electricity etc. displaying the name of the owner and the address of the premises. (not older than two months)
Process Flow
At ICI, LLP registration process becomes seamless along with your coordination. Just fulfil the checklist provided by our team along with the specified required documents. The registration procedure shall be completed in the following five steps:
- Step 1: Obtaining DPIN and DSC for all designated partners of LLP as mandated by law
- Step 2: Application for availability/approval of name for LLP
- Step 3: LLP agreements determining the mutual rights and duties of each partner and between partner and LLP. The LLP agreement must be filed in form 3 on MCA portal within 30 days of incorporation
- Step 4: Approval of MOA and AOA by registrar and issue of Incorporation certificate for LLP after submitting required documents to Registrar
- Step 5: Application for PAN, TAN and bank accounts in the name of the LLP
FAQs
a. What is an LLP Agreement?
An LLP agreement is made between the partners and the LLP regarding the relationship between the individual partners in the LLP. An LLP agreement usually consists of management policies, the inclusion of new partners, policy-making strategies, and so on.
b. Who is eligible to become a designated partner in an LLP?
Only an individual having a sound mind can become a designated partner in an LLP.
However, any individual, or any company or an LLP, can become a partner.
c. How many partners are required to incorporate an LLP?
To incorporate an LLP, a minimum of two people are required. An LLP must have a minimum of two partners and can have a maximum of any number of partners.
d. What is DPIN?
Designated Partner Identification Number (DPIN) just like a Director Identification Number (DIN) is a unique identification number assigned to all existing and proposed designated partners of an LLP. It is mandatory for all present as well as proposed designated partners to have a DPIN. DPIN has life-long validity, and a person can have only one DPIN.
e. Still have doubts?
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