LLP to Private Limited Company2023-03-14T21:28:08+05:30

LLP to Private Limited Company

A Private Limited Company is one of the popular business organizations amongst startups and emerging businesses. Limited Liability Partnership (LLP) can be easily converted into a Private Limited Company and can avail various benefits like infusion of additional investors, separation between ownership and management, etc.

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    Introduction

    Conversion from LLP to Private Limited Company is suitable for medium and large-scale or capital intensive businesses, start-ups as it allows outside funding to be raised easily, limits the liabilities of its shareholders, has lower tax rates, and enables them to offer employee stock options to attract top talent. Limited Liability Partnership (LLP) registered in India with 2 or more partners can be converted into a Private Limited Company as per the provisions contained in Section 366 of the Companies Act 2013.

    A Private Limited Company is a type of business structure, which provides separation between ownership and management, provides flexibility in the transfer of ownership and management. However, the private limited company may induct up to 200 shareholders and shares of which are prohibited from being publicly traded. Therefore, nowadays, many Limited Liability Partnerships (LLPs) are converting into a Private Limited Company for more growth and expansion purpose.

    Advantages of Converting an LLP into Private Limited Company

    • Enhanced Flexibility

      A Private Limited Company offers flexibility in change of ownership and management in regards to process for addition or retirement of directors, allotment of new shares, transfer of existing shares, issue of ESOP/Sweat Equity shares etc. to the employees.

    • Allocation of ownership and management to investors

      Businesses that will require funding from venture capitalists (VCs), angel investors, etc need to register as private limited companies. This is because private limited companies can make them shareholders and offer them a seat on the board of directors, whereas LLPs would require investors to be partners.

    • Preferred by banks, VCs & investors

      As the private limited company’s books are mandatorily audited from independent auditor every year, therefore most of the Banks, VCs, and investors trust and prefer them over other forms of business.

    • Separation between Ownership and Management

      In Private Limited company there is a clear separation between ownership and management which ensures that management of company is headed by a team of professionals with the diverse skills necessary to effectively run the company.

    • Lower Taxation Rates

      A Private Limited Company with a lower turnover has to pay income tax at the rate of 25% on its profits, whereas LLP has to pay flat 30% tax on its income.

    Minimum Requirements For Conversion of LLP into Private Limited Companies

    • Minimum 2 Partners of LLP to be shareholder/member of the Company

    • Minimum 2 Partners/Designated Partners of LLP to be Director of the Company (At least 1 of the director shall be an Indian Resident)

    • DIN/DPIN of Designated Partners

    • DSC of the Partners of LLP

    • Copy of Newspaper advertisement

    • Consent from majority of partners for conversion

    • Consent from secured creditors (if any)

    • No objection certificate from the concerned Registrar of Companies and LLP

    • Latest copy of Income Tax Return (ITR)

    What is included in our conversion of LLP into Company Package

    • Company name search and approval

    • Digital Signature Certificate (DSC) for 2 Director/Shareholder

    • Preparation of Documentation, papers, declaration, affidavit for conversion into Company.

    • Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Act

    • Filing of Form SPICE + and URC 1 with the ROC

    • Memorandum of Association (MOA) and Articles of Association (AOA)

    • Certificate of Conversion by Registrar of Companies (ROC)

    • PAN and TAN for the Company

    Procedure for conversion of LLP into Company

    • Collection of required documents

      In the very first step, the applicant has to send us the required documents of the existing LLP as per the checklist. We will then verify the documents provided, check the eligibility of the entity for conversion and proceed towards next step.

    • Application for Name Approval

      Applicant has to provide proposed name of Company, main objects and any other relevant information of the existing LLP which shall be submitted to MCA.

    • Application for Digital Signature Certificate (DSC)

      Once the name is applied, we shall apply the Digital Signature Certificate (DSC) of directors/shareholders for digitally signing the forms. If the directors/shareholders already have DSC, then this step can be skipped.

    • Submission of Form for Conversion

      After the name is approved and DSC is generated, we need to issue newspaper advertisement and then prepare and submit Form SPICE + and URC 1 along with other required documents for final approval to MCA.

    • Get Certificate of Conversion

      After successful submission of forms, we shall get the certificate of conversion which shall be a proof that the LLP has been successfully converted into Company

    • Change of Details in other registrations

      After the conversion, we have to make changes in other registrations which was previously obtained by LLP such as PAN, TAN, GST, EPF, Professional Tax Registrations etc.

    Documents Required for Conversion of LLP into Company

    • Certificate of Incorporation of LLP

    • PAN and TAN of LLP

    • LLP Agreement along with Supplementary Agreement

    • Consent of partners for Conversion of LLP

    • Consent of all shareholders for Conversion of Company to LLP

    • Advertisement in Form URC-2 in an English newspaper and in any vernacular language newspaper (seeking objections, if any within 21 days from publication) circulating in the district in which LLP situated after reservation of name

    • Digital Signature Certificate (DSC) of Designated Partners

    • Copies of Financial Statement, Auditor report, Income tax return (ITR) of the LLP previously filed

    • Pending Litigation against company (if any)

    • Written Consent / NOC from Secured Creditors (if any)

    • No objection certificate from the concerned Registrar of Firms or Registrar of Companies

    • Pending Litigation against LLP (if any)

    • Details / Statement of Assets and Liabilities of LLP

    • Details of any dues towards Income tax Dept, GST Dept, Banks or Financial institution, Central / State / Local Government Authorities.

    • Details of pending dues towards the Creditors, lender of the LLP

    • KYC Documents such as PAN, Identity and Address proof of director and shareholder.

    • Utility bill such as Electricity bill, Water Bill, Gas Bill along with NOC from the owner of premises for office address of company.

    • Any other documents as may be prescribed

    Effects of conversion of LLP into Company

    • All the moveable and immovable property including actionable claims held by the LLP shall vest in the company.
    • All the rights and liabilities of the LLP in respect of any debt or obligation or contract entered into prior to such conversion shall continue in the name of the company.
    • All the contracts entered into with various stakeholders’ viz., vendors, customers, service providers, consultants and employees shall continue upon conversion.
    • All legal proceedings shall continue in the name of the new company.

    FAQ

    How much time is needed for conversion of LLP into company in India?2022-01-11T11:44:30+05:30

    On average it takes 1-2 months of time for completion of conversion, 2 different approvals are required from government bodies, one for name confirmation, second for incorporation and conversion into Company. However, this is dependent on the workload of the Central Registration Centre (CRC), MCA.

    Do I need to be physically present during this process?2022-01-11T11:44:05+05:30

    There is no such requirement, all the required documents are filed electronically, so you would not need to be physically present. You would just need to send us scanned copies of all the required documents and forms.

    Who can be a member of a Private Limited Company in case of conversion?2022-01-11T11:43:41+05:30

    All the partners of the LLP whether individual or a body corporate shall become the member/shareholder of the private limited.

    How many minimum partners are required in the LLP to convert into Private Limited Company?2022-01-11T11:43:08+05:30

    There should be a minimum of 2 partners in the LLP for conversion of LLP into Private Limited Company, but for conversion of LLP into Public Limited Company there shall be atleast 7 partners.

    Who can be the director of company on conversion?2022-01-11T11:42:37+05:30

    The designated partners of LLP may become director in the company on conversion.

    Can an LLP with secured loan convert into Company?2022-01-11T11:42:14+05:30

    Yes, an LLP with secured loan may convert itself into LLP after obtaining No Objection Certificate (NOC) from such creditor.

    While converting into private limited company, what is the maximum number of shareholders and directors that I can keep?2022-01-11T11:41:48+05:30

    While converting into private limited company, there can be maximum of 200 shareholders and 15 directors.

    Is the consent of partners required for conversion of LLP into company?2022-01-11T11:41:25+05:30

    Yes, the consent of a majority of partners is mandatory for the conversion of LLP into the company.

    What is Memorandum of Association (MoA) and Articles of Association (AoA)?2022-01-11T11:40:32+05:30

    The Memorandum of Association (MOA) is a document that sets out the constitution of a company and is therefore the foundation on which the structure of the company is built. It defines the scope of the company’s activities and its relations with the outside world.

    The Articles of Association (AOA) are company’s bye-laws or rules and regulations that govern the management and internal affairs and the conduct of its business. Both the documents are required to be registered with the Registrar of Companies at the stage of incorporation of the company.

    Is it required to have a company’s books audited?2022-01-11T11:39:52+05:30

    Yes, a private limited company should get its book audited and file the same with the Registrar of Companies (ROC) every year.

    Is newspaper advertisement required for conversion of LLP into Company?2022-01-11T11:39:16+05:30

    Yes, a notice about conversion shall be published in newspapers of English and vernacular language seeking objections.

    What are the mandatory compliances for Company?2022-02-01T21:06:03+05:30

    Know about mandatory compliances here

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