Partnership firms repositioning into Limited Liability Partnerships (LLPs) has increased in recent years. The reason behind this is that the LLP has the following significant feature or benefits, which Partnership Firms do not have:-
1. No limit to the number of partners
2. The liability of partners is limited to the amount of capital contributed.
3. LLP is a body corporate & has a perpetual succession
4. LLPs enjoy higher creditworthiness compared to partnerships
5. Complete flexibility in managing the business
6. Foreign Direct Investment(FDI) in LLPs is allowed
7. Further professional firms are now allowed to convert themselves into LLP
8. LLPs can enter into merges, and amalgamate with other LLPs
Page Contents
A. Regulatory Framework for Conversion of Firm into LLP
1. Section 55 of the LLP Act, 2008 & Rule 38 of LLP Rules, 2009
2. Schedule 2 of LLP Act, 2008
B. Eligibility for conversion of Firm into LLP
One of the major requirements for the conversion of a Partnership Firm into an LLP is that the LLP formed from the Partnership has the same Partners as the original Partnership. The LLP being converted cannot have new or fewer Partners than the Partnership firm.
And, Registered as well as unregistered Partnership Firms are eligible for conversion into LLP
C. Pre- Conditions for conversion of Firm into LLP
1. The firm may be or may not be registered under the India Partnership Act, 1932;
2. There should be consent in writing from all the Partners for conversion;
3. Every partner should contribute to the LLP;
4. DPIN (DIN) should be acquired for all the designated partners;
5. All the partners becoming partners in the LLP shall contribute in the same proportion in which their capital accounts stood in the books of the Firm;
6. Up to date filing of Income Tax Returns;
7. Consent of all the creditors shall be given for the proposed conversion;
8. At least 1 designated partner shall be Resident in India.
D. Procedure for conversion of Firm into LLP
STEP-I:- Pre-requirements
All the Designated Partners shall have DPIN and DSC (Digital Signature Certificate).
However, if there shall be only 2 Designated Partners in the proposed LLP then DIN shall allot them by Fillip form itself.
STEP-II:- Reservation of Name
File form RUN LLP for reservation of name of the proposed LLP. The addition of the word LLP or Limited Liability Partnership at the end is allowed for the existing name of the firm to be converted.
STEP-III:- Filing of Incorporation Form i.e., Fillip
After approval of name of proposed LLP shall file Form Fillip for conversion of Firm into LLP all necessary information and attachments.
STEP-IV:- Filing of Form: 17
Application for conversion is required to be filed by the partners in Form -17 along with the following attachments:-
1. Statement of assets & liabilities of the firm duly certified by a CA in Practice;
2. List of Creditors along with their consent for conversion;
3. Consent of all partners for conversion;
4. Approval from any other body/authority as may be required;
5. Statement of Partners;
6. Copy of Acknowledge of Latest Income Tax Return;
7. Partnership Deed;
8. Registration Certificate of Partnership Firm issued by Registrar of Firms, if any.
STEP-V:- Approval/Sent for Re-submission Refusal by the Registrar:-
The Registrar can issue three orders:-
1. The Registrar on satisfied with all applicable provisions of the LLP Act and Rules in the submitted documents. So, Registrar issued a Certificate of Incorporation pursuant to the conversion of the firm in LLP.
2. If the registrar has a reasonable ground to believe that the documents filed are not proper or he requires some additional documents then he can ask the applicant for the same.
3. If the Registrar has a reasonable ground to believe that the application for conversion filed is improper or the applicant fails to comply with the all applicable provisions regarding conversion, He can reject the application mentioning reason of rejection.
“An appeal may be made before the Tribunal in case of refusal of registration by the Registrar”
STEP-VI:- Intimation to the Registrar of Firms
The LLP shall within 15 (Fifteen) days from the date of conversion intimate about such conversion to the registrar of firms in Form-14 along with following attachments:
1. Copy of Certificate of Incorporation of LLP;
2. Copy of Incorporation documents submitted.
STEP-VII:- filing of form LLP-3 (LLP Agreement):-
Form LLP 3 shall be filed with Registrar within 30 days from the date of conversion of Firm into LLP. There shall be only one attachment in form LLP-3 viz. LLP Agreement.
LLP agreement shall be duly executed/signed by all the designated partners and/or partners of the LLP and witnessed by two witnesses
Once, the LLP is incorporated and the Partnership Firm is converted, the Partnership Firm would be deemed to be dissolved. Further, on the conversion of Partnership into LLP, all properties, assets, interests, rights, privileges, liabilities, obligations of the firm are transferred to the LLP. In other words, the whole of the undertaking of the firm is transferred to the LLP.
E. FAQs for conversion of Firm into LLP
1. Can only registered Partnership Firms be converted in LLP?
No, registered as well as unregistered Partnership Firms be converted in LLP.
2. Is the consent of all creditors and all partners of firm mandatory for conversion?
Yes, Consent of all the creditors shall be mandatorily obtained for conversion of Firm into LLP.
3. What are the provisions for reservation of name by a foreign entity under the LLP Act?
Foreign entity can file an application for reservation of its name or for renewal of name reserved earlier by filing an application in e Form 25.
The name will be reserved in system for a period of three years and an application for renewal of name should be filed before the expiry of three years. In case of renewal of name, the name should be reserved for a further period of three years after renewal date.
4. Is it required to file Form 14 for conversion of firm in to Limited Liabilities Partnership (LLP)?
As per notification dated 15th October, 2015 issued by Ministry, Form-14 is required to be filed in physical form with Registrar of Firms, after approval of Form 17 by Registrar of LLP.
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