Are you running a successful partnership firm but finding yourself limited by it’s structure? Do you dream of enhanced credibility, limited personal liability and greater opportunities for growth? The solution might be closer than you think: converting your partnership firm into a Limited Liability Partnership (LLP). And with Praman Advisors Private Limited, your journey to a more robust business structure can be smooth, efficient, and fully compliant.
1. Overview: Why Convert to an LLP?
A traditional partnership firm, while easy to establish, comes with inherent risks like unlimited personal liability for partners and a lack of separate legal identity. This means your personal assets are vulnerable to business debts and legal issues.
A Limited Liability Partnership (LLP), introduced by the Limited Liability Partnership Act, 2008, offers the best of both worlds: the flexibility of a partnership with the limited liability benefits of a company. It is a distinct legal entity, separate from it’s partners, providing a shield for your personal assets. This makes LLPs an increasingly popular choice for small and medium-sized enterprises (SMEs) in India looking for a more secure and scalable business model.
Converting to an LLP unlocks a multitude of advantages that can significantly impact your business's future:-
- Limited Liability: This is the most significant benefit. Your personal assets are protected from the liabilities of the business. Partners are only liable to the extent of their agreed contribution to the LLP.
- Separate Legal Entity: The LLP has it’s own legal identity, distinct from it’s partners. This means it can own assets, enter into contracts, sue and be sued in it’s own name, enhancing it’s credibility.
- Perpetual Succession: An LLP continues to exist indefinitely, ensuring business continuity, unlike partnership firm.
- Enhanced Credibility and Trust: An LLP is perceived as a more structured and professional entity compared to a traditional partnership, instilling greater confidence in clients, vendors and financial institutions.
- Easier Access to Finance: Due to it’s formal structure and limited liability, LLPs are often favoured by banks and investors when it comes to securing loans or raising capital.
- Fewer Compliance Burden than a Private Limited Company: While more structured than a partnership, LLPs generally have fewer compliance requirements compared to private limited companies, making them a balanced choice for growing businesses.
- No Mandatory Audit (Subject to Turnover/Contribution): An LLP is not subjected to compulsory audit unless it’s annual turnover exceeds ₹40 lakhs or contributions exceed ₹25 lakhs, reducing operational costs for smaller LLPs.
- Limit on Partners: An LLP can have an unlimited number of partners, facilitating growth and expansion.
- Tax Efficiency: LLPs offer certain tax advantages, similar to partnership firms and are exempt from Dividend Distribution Tax (DDT).
To ensure a smooth conversion process, you will need to gather the following essential documents:-
- For the Partnership Firm:
- Certified true copy of the Partnership Deed.
- Latest Income Tax Return (ITR) acknowledgement of the firm.
- Statement of assets and liabilities of the firm, duly certified by a practicing Chartered Accountant.
- List of all secured creditors along with their consent for the conversion.
- Consent of all existing partners for the conversion.
- For Proposed LLP Partners:
- Digital Signature Certificate (DSC) for all proposed partners.
- Designated Partner Identification Number (DPIN) for at least two designated partners. (Praman Advisors can assist in obtaining these.)
- PAN Card and Aadhar Card of all partners.
- Address proof of partners (e.g. latest electricity bill, telephone bill, bank statement not older than 02 months).
- Passport-sized photographs of all partners.
- For the Proposed LLP:
- Proof of registered office address (e.g. electricity bill, rent agreement, NOC from property owner, if rented).
- Details of the proposed business activities of the LLP.
- Consent of the subscribers (partners).
Praman Advisors simplifies the entire conversion process into a few systematic steps:-
- Initial Consultation & Document Collection: Our experts will conduct a thorough consultation to understand your specific needs and guide you on the required documents.
- Obtaining DSC & DPIN: We assist all your partners in obtaining their Digital Signature Certificates (DSCs) and Designated Partner Identification Numbers (DPINs) which are crucial for online filings.
- Name Approval (RUN-LLP Form): We help you propose and reserve a unique name for your LLP through the Ministry of Corporate Affairs (MCA) portal using the "RUN-LLP" form. We ensure compliance with naming guidelines to expedite approval.
- Filing Form 17 (Application for Conversion): We meticulously prepare and file this form, attaching all necessary documents including the firm's details, partner consents and the statement of assets and liabilities.
- Filing Form FiLLiP (Form for Incorporation of LLP): Simultaneously, our team will prepare and file Form FiLLiP which is the application for incorporating the LLP. This includes details of the proposed LLP's registered office, business activities and partner contributions.
- Receiving Certificate of Incorporation: Once the MCA is satisfied with the submitted documents and compliance, they will issue the Certificate of Incorporation for your new LLP.
- Filing LLP Agreement (Form 3): It is mandatory to file the LLP Agreement in Form 3 within 30 days of incorporation. Our legal team will meticulously draft a comprehensive LLP agreement outlining the roles, rights and responsibilities of each partner and ensure it’s timely filing.
- Intimation to Registrar of Firms (Form 14): We will also assist in intimating the Registrar of Firms about the conversion, ensuring proper closure of the erstwhile partnership firm's registration.
- Post-Conversion Compliances: Our services extend beyond conversion. We guide you on essential post-conversion steps like applying for a new PAN and TAN for the LLP, updating bank accounts and re-registering for necessary licenses and approvals.
The cost and timeline for converting a partnership to an LLP can vary depending on various factors including government fees, professional charges and the promptness of document submission:-
- Government Fees: These includes fees for name reservation, filing Form 17, Form FiLLiP and Form 3. These fees are based on the proposed capital contribution of the LLP.
- Professional Fees: Praman Advisors provides transparent and competitive professional fees for handling the entire conversion process including document preparation, filing and expert guidance.
- Total Estimated Cost: On average, the total cost for partnership to LLP conversion in India, including government and professional fees, can range from ₹8,000 to ₹25,000, depending on the complexity and services opted for. We will provide a detailed quote upon understanding your specific requirements.
Manju Laur: 📞 +97119 94042
- Timeline: The conversion process generally takes 02-04 weeks, subject to MCA processing times and the readiness of all required documents. Expedited processing depends on accurate and complete submissions. Our proactive approach aims to minimize delays.
