Section 55 of the LLP Act, 2008 deals with conversion of Partnership Firm into Limited Liability Partnership. As per the relevant provisions of the LLP Act, a partnership firm shall make an application for conversion of firm into a Limited Liability Partnership by filling web Form LLP RUN (Reserve Unique Name). Documents required for the conversion of firm into Limited Liability Partnership are as given below-

1. A list showing names, addresses and occupations of all persons named therein as partners with details of capital contribution held by them;

2. A list showing the particulars of persons proposed to act as Designated Partners of the LLP along with DPIN. If proposed Designated Partner does not have DPIN, separate application shall be made at the time of incorporation of the LLP (Max 2 DPIN can be applied at the time of incorporation);

3. Deed of partnership, bye-laws constituting the firm and if deed of partnership was revised in the past, copies of principal deed and latest modified deed along with certificate of registration of firm;

4. NOC from creditors of the Firm, if any;

5. NOC from Banker of the Firm;

6. Written consent from majority members present at the meeting;

7. Copy of latest ITR of firm;

8. Statement of Assets and Liabilities duly certified by a Chartered Accountant in practice.

  • Conditions to be satisfied for conversion of Firm into LLP:

1. Existing Partnership firm must be registered under the provisions of partnership Act, 1932;

2. If partnership deed does not contain a clause of conversion into Limited Liability Partnership, it is necessary to firstly insert the conversion clause by amending the deed;

3. All the partners of Partnership firm shall become the Designated Partners of the LLP in the ratio of their capital contribution in the firm;

4. Consent of all the partners of the firm for conversion in a duly convened meeting;

5. To work out Capital Account of Partners and to decide the Capital Contribution of the Proposed LLP, which will be the basis for payment of MCA fees on incorporation of the Limited Liability Partnership and payment of stamp duty.

6. Drafting of ‘takeover deed’ for takeover of records, management, affairs, and Assets of firm by Limited Liability Partnership.

7. There shall not be going on any prosecution/proceeding against the firm or any of its partners;

8. If the firm has any secured creditors, need to obtain consent of all such secured creditors along with details;

 9. If firm is registered with any other authority, need to obtain approval from all such authorities.

  • PROCEDURE FOR CONVERSION:

1. Hold the Partners meeting to transact the following-

A] To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the firm as a Limited Liability Partnership;

B] To execute a supplementary Partnership Deed for the following-

1. Provision for converting firm into Limited Liability Partnership;

2. Execute agreement between partners to convert partnership into Limited Liability Partnership;

3. Execution of settlement deed/Takeover Deed.

2. Apply for reservation of name in WEB Form LLP RUN (Reserve Unique Name);

3. After obtaining name availability, Limited Liability Partnership is required to apply to ROC for conversion by filling e-Form 17;

4. Filling of e-form FiLLiP for incorporation of the proposed Limited Liability Partnership giving details of Designated Partners and Capital Contribution.

5. After getting approval for conversion from the ROC, LLP is required to file incorporation agreement with ROC within 30 days of conversion in e-Form 3.

  • DOCUMENTS REQUIRED FOR DIN & DSC:

1. Original PAN Card;

2. Original AADHAR Card;

3. Self-attested copy of latest educational certificate;

4. Passport size photographs-3;

5. Valid e-Mail ID & Mobile No;

6. Place of birth;

7. Current occupation with description.

  • DOCUMENTS FOR CONVERSION OF FIRM INTO LIMITED LIABILITY PARTNERSHIP:

1. Existing Deed of the Firm;

2. Name of partnership & registration no;

3. Date of principal partnership deed;

4. Date of passing of resolution in Partners meeting for conversion;

5. Details of share of partners in the firm;

6. Affidavit by all the partners for dissolution of firm;

7. Declaration by 2 Designated Partners verifying details of members;

8. Copy of original and supplementary partnership deed;

9. Copy of latest ITR;

10. Statement of Assets and Liabilities duly certified by a Chartered Accountant in practice.

  • CAPITAL GAIN TAX & STAMP DUTY ON CONVERSION:

Conversion of firm into Limited Liability Partnership does not give rise to capital gain since no transfer of asset is involved in conversion. When Partnership Firm is converted into Limited Liability Partnership, all the properties of firm shall vest in the LLP. There is no dissolution of firm. Hence Section 45(1) relating to capital gain is not applicable to the Limited Liability Partnership.

Further, as there is no transfer of Asset is involved, requirement of transfer deed is not necessary and hence no stamp duty is payable.

  • ADVANTAGES AND DISADVANTAGES OF LLP:
Sr. No Advantages Disadvantages
1. Automatic transfer of Assets and Liabilities. LLP cannot raise funds from public by way of Issue of Shares
2. Carry forward and set off of accumulated loss and depreciation. No separation of management from owners.
3. No capital gain since partners of the firm are Designated Partners in the LLP. Higher cost of penalty on non-compliance/ filing of e-Forms i.e. Rs. 100/- per day penalty from due date.
4. No stamp duty on transfer of Asset. A minor cannot be admitted to the benefits of LLP unlike partnership firm.
5. Less compliance structure as compared to Company.
6. Limited liability of partners.

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Disclaimer:- The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. The entire contents of this document have been prepared on the basis of relevant provisions and rules and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided. I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

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Qualification: CS
Company: CS Ravindra Kulkarni & Associates
Location: Pune, Maharashtra, India
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