PROCESS FOR CONVERSION OF COMPANY INTO LLP

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PROCESS FOR CONVERSION OF COMPANY INTO LLP

Benefit of the Conversion of company into LLPs is as follows:-
  • Easy to handled in comparison to that of other companies.
  • The maximum limit of shareholders is not limited in an LLP. The LLP can have any desired number of shareholders. However, the maximum number of shareholders is fixed in a private company.
  • Management of funds depends entirely on the members’ wish.
  • LLP doesn’t have to pay the Dividend Distribution Tax which is to be paid by the companies. Also, LLPs save MAT tax and income tax due to interest and remuneration payable to partners.
  • Less compliance than Company.
In short, LLPs involve the best practices of private companies and also protect the freedom of partners, giving them the ability to decide the norms of the company. Thus it combines the best features of various kinds of businesses.

The Finance Bill 2010 stated that the capital gain tax will not be levied on conversion to an LLP if certain conditions are adhered to.

  • All the assets and liabilities of the Company become the assets and liabilities of the LLP.
  • All the shareholders of the Company become partners of the LLP  
  • The capital proportion and profit-sharing ratio of partners are in the same proportion as that of the shareholding in the Company.
  • The shareholders do not receive any benefit, directly or indirectly in the LLP, except by way of capital contribution and profit-sharing ratio. 
  • The total sales, gross receipts, and turnover in any of the three preceding years from the date of the conversion does not exceed Rs. 60 Lacs.
  • The total value of assets as appearing in the books of account of the Company in any of the previous three years does not exceed Rs. 5 crores.
Pre- Requisite requirement for the conversion of the company into LLP
  • Every member of the company must agree with the decision of conversion.
  • All the members become the partners of an LLP.
  • The latest copy of Income tax return is to be filed with ROC.
  • Not just the members, all the creditors of the company must also agree with the conversion.
  • Under Companies Act, no prosecution should have been initiated procedure to be followed.
PROCESS OF CONVERSION OF COMPANY INTO LLP

1.    Obtain Director Identification Number (DIN)
In case of adding some other person as designated partner other than existing Director.

2. Meeting of Board of Directors of Company
  • Call a meeting of the Board of Directors. 
  • Pass requisite Resolution for Conversion of Company into LLP.  
  • Pass requisite Resolution to authorize any director to file all the necessary forms with MCA.
  • Requisite resolution to authorize any director to file all the necessary forms with MCA. 
3. Application for Name Availability

The company will have to apply for reservation of name of LLP and GET NAME APPROVAL CERTIFICATE FROM ROC. (RUN-LLP with ROC)

4. Filing of Incorporation Form with Required Documents 
File E Form FiLLiP with ROC along with following Attachments:
  • Address proof of the registered office of LLP. 
  • The subscription sheets. 
  • Consent to act as a designated partners and partners
  • Identity and Resident proofs of designated partners and partners 
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ designated partner.
5. Filing of Application for Conversion into LLP
Form 18 is the form for conversion of a company into an LLP. But it needs to be filed with Form for incorporation itself. 

This form has information about the conversion of the company into LLP such as: 
  • Whether all the shareholders of the company have given their consent for the conversion of a company into the LLP.
  • If all the partners of the LLP comprise all the shareholders of the company and no one else. 
  • An up to date Income-tax return is file as per Income tax act, 1961.
  • Documents including the latest balance sheet and annual returns under the Companies Act, 2013 filed with MCA.
  • Validating if any conviction, ruling, order, a judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting as on date?
  • Getting to know regarding any security interest in the assets of the company is subsisting or still in force. 
  • Whether any earlier application for conversion of the said company into limited liability partnership was refused by the Registrar. 
  • If there is a presence of any secured creditors.
File E-FORM- 18 with ROC along with following ATTACHMENTS: 
  • Statement of the consent of shareholders (Mandatory) 
  • Statement of accounts of the company certified as true and correct by the independent auditor 
  • List of all the secured creditors along with their consent 
  • Copy of acknowledgement of latest income tax return (Mandatory) 
6. Certificate of Incorporation as LLP from ROC
After complying to all the formalities by the company and approved by the Ministry, ROC to issues a COI as to the conversion of LLP.

7 Filing of E-Form -14 (Intimation to ROC)

After receiving incorporation certificate of LLP it has to be filed within 15 days of the date of conversion.  
ATTACHMENTS OF E-FORM 14 
  • Copy of Certificate of Incorporation (COI) of LLP. 
  • Copy of incorporation document submitted in E-Form FiLLiP to ROC. 
8. Drafting of Limited Liability Partnership Agreement

9. Filing of E-Form-3
This form provides information about the LLP Agreement entered into between the partners. This form is to be filed in 30 days from the date of conversion of the company into an LLP. 
Attachment Required: LLP Agreement 
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Disclaimer:- Information provided here is on the basis of personal research and provisions as per the act and information existing at the time of preparation. It is not a professional advise and information is subject to change without any notice. Author assumes no responsibility for the consequences of use of Information provided. This in only a knowledge sharing initiative and author has no intended to accost any profession and businesses. 

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