Conversion of Partnership Firm to LLP
Convert to a Public Limited Company for greater funding and growth.
What is Conversion of Partnership Firm to LLP?
Converting a partnership firm to a Limited Liability Partnership (LLP) is a strategic upgrade for businesses seeking a more organized structure with legal recognition and limited liability protection. This transition retains your existing business operations while offering greater flexibility, improved credibility, and reduced personal risk for partners. It is governed by the LLP Act, 2008, and is ideal for firms aiming to grow while maintaining simplified compliance.
Benefits of conversion of Partnership Firm to LLP
- Separate Legal Entity – LLP is distinct from its partners in law and can own property or enter contracts.
- Tax Efficiency – LLPs are not subject to dividend distribution tax, and tax rates are often lower.
- Minimal Compliance – Fewer regulatory requirements compared to companies.
- Flexible Ownership – Partners can easily be added or removed.
- Credibility Boost – Improves business reputation and facilitates easier fundraising.
- No Capital Mandate – No minimum capital is required to start or convert.
- Reduced Risk Exposure – Each partner’s liability is limited to their agreed contribution, offering peace of mind.
- Attracts Investors – LLPs are a more credible and preferred structure for investors compared to traditional partnerships.
- Continuity of Business – All assets, liabilities, licenses, and contracts of the firm automatically transfer to the LLP, ensuring uninterrupted business.
- Legal Recognition – LLPs enjoy better recognition under the law, helpful in contracts and legal matters.
- Suitable for All Business Types – Especially beneficial for services-based firms like legal, consulting, finance, tech, etc.
- Global Business Friendly – LLPs are widely recognized internationally, easing cross-border operations and collaborations.
- No Audit Requirement (Upto Certain Limit) – If turnover is below ₹40 lakh or capital contribution below ₹25 lakh, no audit is required.
- Flexible Management Structure – Partners can manage the business directly, with clearly defined roles in the LLP Agreement.
- Faster Decision Making – Lesser bureaucratic hurdles lead to quicker decisions and operational flexibility.
- Transparency & Accountability – Mandatory filings and public disclosure increase transparency, which builds trust with clients and partners.
Mandatory Criteria for Conversion of Partnership Firm to LLP
Eligibility: Only a registered partnership firm can convert to an LLP.
- Minimum Partners: At least 2 partners required (can be individuals or body corporates).
- Consent of Partners: All partners must consent to the conversion.
- Registrar Filing: File an application with the Registrar of Companies (RoC), including the partnership deed and consent of partners.
- Assets and Liabilities: Submit a statement of assets and liabilities.
- Creditors’ Consent: Obtain consent from all creditors (no pending dues or litigation).
- Tax Compliance: Ensure all tax obligations (e.g., income tax, GST) are cleared.
- LLP Agreement: Draft and execute an LLP agreement specifying rights and obligations of partners.
- No Change in Business: The business activity must remain the same post-conversion.
- Regulatory Approval: Get approval from relevant authorities if operating in regulated sectors.
- No Ongoing Insolvency: The firm should not be in insolvency or bankruptcy proceedings.
Documents Required for Conversion of Partnership Firm to LLP
- Partner-Related Documents:
- PAN Card and Aadhaar of all partners
- Address proof (Voter ID, Passport, or Driving License)
- Passport-size photographs
- Firm-Related Documents:
- Registered Partnership Deed
- Registration Certificate of the firm
- Latest income tax return acknowledgment
- Consent letter from partners for conversion
- Registered Office Documents:
- Address proof (utility bill not older than 2 months)
- Rent agreement (if rented) or ownership proof
- NOC from property owner
How to Register for Conversion of Partnership Firm to LLP?
- Obtain Digital Signature Certificates (DSC) for all partners.
- Apply for Director Identification Number (DIN) for designated partners.
- Reserve LLP name through the MCA portal (RUN-LLP).
- File Form FiLLiP with MCA for incorporation of LLP.
- Submit Form 17 (application and statement for conversion) and Form 2.
- Execute LLP Agreement and file Form 3 within 30 days of incorporation.
- MCA issues Certificate of Incorporation for the new LLP.
- Update PAN, TAN, and bank accounts accordingly.