Convert LLP into Pvt Ltd
Online Compliance
For a growing LLP, conversion as a Private Limited Company makes sense from the point of view of management and the ability to attract investors. We help in planning and necessary legal compliance in converting the LLP into a Pvt Ltd Company.
Conversion of LLP into Private Limited Company
An LLP is the simplest form of Incorporated Business in India that is easy to start and lighter on the compliance aspect compared to the company form of organization. There is no hard and fast rule whether a business should begin as LLP or a Private Limited Company. As per the Law, there is no restriction on the kind of business you may do in the LLP form of business. However, it is presumed that the LLP form of business is very well suited for professionals such as Architects, Doctors, Engineers, CA, CS and Lawyers.
Due to fewer compliance requirements, small businesses and startups prefer a Limited Liability Partnership (LLP) over a Private Limited. In the case of LLP, the statutory audit by CA is required only when the turnover of the LLP is more than 40 Lakhs or where the capital is over Rs. 25 Lakhs. In other words, when the LLP grows, the compliance requirement is similar to that of a Private Limited Company. Further, the LLP is investor-friendly, and for every small change in the ownership, the LLP agreement has to be changed. In contrast, the shareholding changes can be done easily in a Private Limited Company. For these reasons, many LLP converts as Private Limited Company; Domiyance Finance provides end to end service about the conversion of the LLP into a Pvt Ltd Company.
Eligibility Requirements For Conversion of LLP to Company
- The LLP must have at least two partners for its conversion as a Private Limited Company;
- All Partners must agree to the conversion from LLP to Company;
- The LLP must have filed all its statutory returns and LLP agreement;
- The exact name of the LLP shall continue, and the word “LLP” shall be substituted by “Private Limited.” No change of name is permitted;
- The Contribution in the LLP shall become the Capital for the company, and all partners of the LLP will become shareholders in the company.
Step-Wise Process To Convert an LLP into a Company.
Consent of all Partners of the LLP
The process starts with a meeting of Partners to secure approval of all partners to the proposed conversion of LLP into a Private Limited Company according to section 366 of the Companies Act. In the partners meeting, two partners need to be authorised to sign and execute all papers to convert LLP into a company.
Newspaper Publication
The intent to convert from an LLP to a company needs to be published in two newspapers, having circulation in the district, one in vernacular language and the other in an English daily. The public announcement in the newspaper must be made 21 clear days from the filing of URC-1.
NOC From the ROC and Creditors
The NOC from the ROC, where the LLP Registered is required, and the Creditors must give their unconditional No Objection to the conversion of the LLP. If there is no Liability in the LLP, then a statement signed from the partners that there is no liability would be required.
Apply for Name Reservation of Company in RUN
RUN is an online form in which an application for the name reservation is filed to the ROC. No change in the name of the LLP is allowed at this stage; the words LLP shall be substituted with “Private Limited.”
E-file URC-1, MOA, AOA, DIR-2 Forms and Spice Plus
Finally, within 30 Days of the name reservation of the LLP, the application for conversion of the LLP into a company shall be filed in URC-1 along with the Spice Plus form, e-MOA, E-AOA and other documents. After the approval of the forms, the ROC issues a new certificate of incorporation in the company’s name.
List of Documents Required for Conversion of LLP into Company
| A. List of Documents Required for Conversion of LLP into Company |
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| B. List of attachments in E-form Spice+ |
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Benefits of Conversion From LLP to a Private Limited Company
Step 1
Retain and Grow the Brands
By way of conversion from the LLP, the new resulting private limited company continues with the LLP’s legacy and does not lose the reputation that the LLP earned. The IPR Rights of the LLP is transferred to the private limited company without any capital gain.
Step 2
Carry Forward the accumulated losses and Depreciation:
Under the Income Tax Act, the unabsorbed losses or the Depreciation of the LLP gets transferred to the new private limited. This is one of the significant benefits of LLP Conversion to the Company.
Step 3
Ease in Fund Raising
The investors prefer a Private Limited Company for ease of allotment of shares and specific legal provisions like valuation and private placement. Further, the details of the private limited company are verifiable at MCA.
Step 4
ESOP To Employees
The growing companies need to give Employee Stock Options to retain the talent; it is very much popular in the It Sector. The ESOP is possible only in a Company form of organisation, where there is specific law requiring the ESOP Plan to be registered with the registrar of companies.
Step 5
No Capital Gain Tax
The assets of the LLP is transferred to the converted private limited company, and there shall not be any capital gain tax levied on such transfer as a result of conversion from the LLP to a Company. Please note that the existing LLP is replaced by a Company, hence no capital gain tax.