Article gives Overview of Limited Liability Partnership, Explains Benefits of LLP and also clarifies that Who can create the LLP and Procedure for conversion of Company into LLP.
Overview of Limited Liability Partnership:-
As per the LLP Act 2008 an “LLP is defined as that business entity where having two Designated Partners is minimum requirement and such partners had their liability limited to their contribution towards the LLP”.
A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organization and offers a hybrid structure. LLP as a business Structure proved itself to be a midway for those who were operating partnership firms, but wanted to work in the organized sector under a legally compliant structure with world recognition restricted liability.
The greatest advantage which LLP offers is the flexibility to do business. Instead of being bound by legal provisions, LLP’s are free to create their own rules of management, which was not possible in case of companies. As result of which, a lot of companies have started to convert them- selves into LLP.
Benefits of LLP:-
1. Low registration cost and easy to establish.
2. Separate Legal Entity and unlimited number of partners
3. Limited Liability of partners and Personal Assets of the partners are not exposed except in case of fraud
4. No requirement of minimum Capital Contribution
5. Unlike company, no Tax is levied on Profit distributed to Partners
6. LLP is flexible and governed by rules framed by partners
7. Less Compliance as compared to Company
8. There is no maximum limit for the number of partners in LLP
Who will create the LLP:-
1. Start-ups and Small to medium scale businesses
2. Businesses where different partners have different role to play
3. Businesses where investors can play a role as a silent partner while the owners are in the driver’s seat.
Procedure for conversion of Company into LLP:-
1. Call a meeting of the Board of Directors and pass the Resolution for Conversion of Company into LLP and Resolution to authorize any director to file all the necessary forms with MCA.
2. The company will have to apply for reservation of name of LLP and get name approval certificate from ROC.
3. File E-Form FILLIP with ROC along with following Attachments:
i. Address proof of the registered office of LLP.
ii. The subscription sheets.
iii. Consent to act as a designated partners and partners
iv. Identity and Resident proofs of designated partners and partners
v. Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ designated partner.
4. Filing of Application for Conversion of company into LLP:-
i) 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:
a) Whether all the shareholders of the company have given their consent for the conversion of a company into the LLP.
b) If all the partners of the LLP comprise all the shareholders of the company and no one else.
c) Whether any security interest in the assets of the company is subsisting or in force.
d) An up to date Income-tax return is file as per Income tax act, 1961.
e) Whether any prosecution initiated against or show cause notice received by the company for alleged offences under the Companies Act, 2013.
f) Whether any proceedings by or against the company is pending in any court or tribunal or any other Authority.
g) Whether any earlier application for conversion of the said company into limited liability partnership was refused by the Registrar.
h) Whether any conviction, ruling, order, judgment of any court, Tribunal or other authority in favour of or against the company is subsisting as on date?
i) Whether there are any secured creditors
j) Documents including the latest balance sheet and annual returns under the Companies Act, 2013 filed with MCA.
k) Whether any clearance, approval or permission for conversion of the company into LLP is required from any body/authority.
ii) File FORM- 18 with ROC along with following attachments:
a) Statement of the consent of shareholders
b) Statement of accounts of the company certified as true and correct by the independent auditor
c) List of all the secured creditors along with their consent
d) Copy of acknowledgement of latest income tax return