Summary: Converting a Limited Liability Partnership (LLP) into a Private Limited Company (PLC) is governed by Section 366 of the Companies Act, 2013. The conversion process involves several steps, starting with publishing a notice in form URC-2 in two newspapers, one local and one English. Next, obtain name approval via the RUN application, followed by filing forms URC-1, SPICe, SPICe MOA, and SPICe AOA. Required documents include a list of members, first directors, consent letters from partners and creditors, and the latest financial statements. Benefits of conversion include better access to funding, enhanced brand recognition, and the ability to issue shares for ownership transfer. PLCs also offer limited liability protection and potential tax benefits, especially after the reduction in corporate tax rates from 30% to 22%. This move is beneficial for businesses aiming for growth, expansion, and increased credibility. It’s advisable to engage experts to navigate the conversion process smoothly and comply with all legal requirements efficiently.
CONVERSION OF LLP INTO COMPANY
An LLP can be converted into private ltd. Company as per the provisions contained in the section 366 of the Companies Act ,2013 and the Companies (Authorised to Registered) Rules, 2014.
This steps to be initiated in 2 ways:-
1. Incorporation of the new corporate entity.
2. Conversion of existing entity(e.g.LLP/Partnership firm ) into a company.
PROCESS OF CONVERSION OF LLP INTO COMPANY
♦ Publish newspaper notice in form URC-2
A notice seeking objections for conversion of LLP into company must be published in form URC-2 in atleast 2 newspapers one in local language wherein registered office is situated and another in english language newspaper.
♦ File RUN
Name Approval has to be obtained from the ROC by submitting an application in RUN. Object clause of Company must be attached.
♦ Filing form No URC – 1 & SPICe & SPICe MOA and SPICe AOA
After getting the approval of name from Registrar of Companies and after 21 days from the publication of newspaper advertisement, the applicant should file the form No URC-1 & SPICe along with the following documents.
Attachments to URC-1
1. List of the members with details viz. names, address, occupation, shares held by them appropriately, etc.
2. List of the first directors of the private company with details viz. names, address, the DIN etc.
3. An affidavit from every person proposed as first directors, that he is not banned to be a director under section-164
4. A list including the names & addresses of partners of LLP
5. A copy of LLP agreement & certificate of registration duly verified by two designated partners
6. A statement indicating the following specifications q) the nominal share capital of firm & the number of shares into which it is separated b) the number of shares taken & the amount paid for every share c) the name of the firm, with the addition of word Limited or private limited is required.
6. A written consent of all partners of LLP
7. A written consent or No objection certificate from all creditors.
8. Copy of newspaper advertisement,
9. Statement of accounts of the company which must not be 30 days preceding the date of the application and it must be duly certified by the auditor.
10. A copy of latest income tax return
11. Undertaking by proposed first directors with regard to compliance with Stamp Act
Attachments to SPICe
1. Consent & Declaration by first Directors in form DIR-2; (On Plain Paper)
2. Self-Declaration by first directors and subscribers in form INC-9; (On Plain Paper)
3. ID Proof and Address Proof of Directors; (PAN card and Aadhar card)
4. Resolution of Partners for conversion of LLP into Company;
5. Proof of regd. Office like Rent Agreement/Sale deed
6. Latest Electricity bill (Not older than 2 Months)
7. NOC of Owner of Office, If Regd office is rented.
BOARD MEETINGS.
Pass Resolution for Conversion of Company into LLP and to authorize any director to file all the necessary forms with MCA. Take the written consent of all shareholders for conversion of company into LLP.
NAME AVAILABILITY APPROVAL
File web based Form RUN-LLP with ROC. Board Resolution passed by the company approving the conversion into LLP shall be attached with the aforesaid form.
BENEFITS OF CONVERTING LLP INTO PRIVATE COMPANY
There are many benefits to converting a Limited Liability Partnership (LLP) into a Private Limited Company (PLC), including:
1. Funding: PLCs have better access to funding options like debt and equity financing.
2. Brand recognition: PLCs are generally considered more credible and reliable than LLPs.
3. Ownership transfer: PLCs can issue shares, which allows for the transfer of ownership.
4. Limited liability: PLCs offer limited liability protection to shareholders, similar to LLPs.
5. Tax benefits: PLCs may offer tax advantages.
6. Expansion: PLCs may have a greater scope for expansion.
7. Perpetual succession: PLCs can continue to exist in the eyes of the law even after the owner dies or leaves the business.
8. Carry forward losses: Losses and depreciation from an LLP can be carried forward when the business is converted
CONCLUSIONS
Recently, Government slashed the corporate tax rate of Companies from 30% to 22% while tax rate on LLPs are unchanged and continue to attract tax @ 30%. So, many existing LLPs are now planning to convert themselves into Companies for multiple reasons like Growth and Expansion, Infusing equity capital, reducing tax liabilities, receiving foreign investment, attracting VCs and HNIs etc.
There are many benefits of converting LLP into private company as mentioned above. It is beneficial to get the conversion done by experts only. Financial tree company has been working from many years. We have completed the legal compliances of many companies timely and that too at affordable prices. Many people trust us because we work on time.
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