CONVERSION OF COMPANY INTO LLP

 LLP:

LLP is a unique form of legally recognized corporate entity, which integrates the features of both the Limited Corporations and the Traditional Partnership Firms. As it is a unique Hybrid Combination of both Company and Partnership, LLP is especially suitable for small to medium-sized business enterprises and professionals particularly.

KEY BENEFITS:

1. One of the most important reasons for the conversion of a Company into a Limited Liability Partnership is derived from the Income Tax Act. The Income Tax Act, 1961 provides for  payment of Dividend Distribution Tax by the Company, but a Limited Liability Partnership (i.e. LLP) would not liable to pay Dividend Distribution Tax.

2. There is no limit on number of partners in the LLP.

3. Minimal compliance with the ROC (i.e. Registrar of Company) and lower cost.

4. No Capital Gain Tax: No Capital gain tax shall be charged on transfer of property from the company to LLP, if the conditions stipulated in the Section 47(xiiib) of the Income Tax Act 1961, are fulfilled.

5. Carry forward and set off losses and unabsorbed depreciation of the company is deemed to be loss/depreciation of successor LLP the previous year in which conversion was effected, thus such loss can be carried for further 8 years in the hands of the successor LLP, if the conditions stipulated in the Section 47(xiiib) of the Income Tax Act 1961, are fulfilled.

PROCESS OF CONVERSION OF COMPANY INTO LLP

A. OBTAIN DIN:

Earlier there was concept of DPIN, which has been abolished therefore. Now obtain DIN for those designated partners who don’t posses DIN already.

B. BOARD MEETING:

·         Call meeting of Board of Directors.

·         Pass Resolution for Conversion of Company into LLP.

·         Pass Resolution to authorize any director to Apply for Name of LLP.

·          

APPLICATION FOR NAME AVAILABILITY:

File e-form LLP-1 with ROC.

Attachments: Board Resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form.

C. Obtain name Approval Certificate from ROC.

D. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:

Contents of Agreement are:

·         Name of LLP

·         Name of Partners & Designated Partners

·         Form of contribution

·         Profit Sharing ratio

·         Rights & Duties of Partners

·         Proposed Business

·         Rules for governing the LLP

It is not necessary to have the LLP Agreement signed at the time of incorporation, as the details of the same needs to field in e-form 3 within 30 days of incorporation but in order to avoid any dispute between the partners as to the terms & conditions of the agreement after the conversion into LLP.

E. FILLING OF INCORPORATION DOCUMENTS: File E-Form- 2 with ROC along with following ATTACHMENTS:

·         Proof of Address of Registered office of LLP.

·         Subscription sheet signed by the promoters.

·         (Notice of Consent & Appointment of Designated Partners with their personal details)

·         Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner

F. FILLING OF APPLICATION FOR CONVERSION:

File E-FORM- 18 with ROC along with following ATTACHMENTS:

·         Statement of shareholders.

·         Incorporation Documents & Subscribers Statements in Form 2 filed electronically.

·         Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.

·         List of all the Secured creditors along with their consent to the conversion.

·         Approval of the governing council (In case of professional private limited companies)

·         NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.

·         Approval from any other body/authority as may be required.

·         Particulars of pending proceedings from any court/Tribunal etc.

G. After all formalities and filings been complied by the applicants and approved by the Ministry, REGISTRAR OF LLP TO ISSUE A CERTIFICATE OF REGISTRATION in Form No. 19 as to conversion of the LLP. The Certificate of Registration issued shall be the conclusive evidence of conversion of the LLP.

H. FILLING OF E-FORM-3:

This form provides information in respect to the LLP Agreement entered into between the partners.

ATTACHMENT: LLP Agreement

I. CERTIFICATE OF INCORPORATION as LLP from ROC.

J. FILLING OF E-FORM-14: (INTIMATION TO ROC)

After Receiving Incorporation Certificate Limited liability partnership to file within 15 (fifteen) days of the date of registration, information to the concerned Registrar of Companies with which it was registered under the provisions of the Companies Act, 2013 (1 of 2013) about the conversion and of the particulars of the limited liability partnership in within 15 days of conversion into LLP.

ATTACHMENTS OF E-FORM 14

·         Copy of Certificate of Incorporation of LLP formed.

·         Copy of incorporation document submitted in Form 2

By CA Shivani Agarwal For more details contact- shivani@akvassociate.com