Conversion of LLP into Private Limited Company
/ Company Formation / Registration

Conversion of LLP into Private Limited Company

A limited liability partnership (LLP) is a corporate business form blending attributes of both company and traditional partnership firms. It offers the benefits of limited liability to the partners. The concept of LLP was emerged and took place in statutes in 2008 while the idea of a private company is much older.

LLPs offer several benefits like separate legal entity, limited liability of partners, perpetual succession, lesser compliance cost than companies etc. However, despite several benefits of LLP, there are some drawbacks, like:

  • LLPs incline income tax at the rate of 30%, while companies attract income tax at 22%. Therefore, it is the most significant advantage of a company over LLP.
  • LLPs do not have the idea of shareholding. So, venture capitalists and private equity investors who actively want to participate in business management do not prefer to invest in the LLP.
  • Bankers prefer to lend companies than to LLPs. So, companies have better borrowing capacity.

In India, private companies are among the foremost common business structures. They provide higher chances of growth and development and are best for raising equity capital, which isn’t possible in LLP. LLP structure isn’t suitable if the owners are necessary for speculators or private equity investors to take a position in their company. They might prefer to infuse in a private limited company and not a partnership or LLP. The second cause for conversion is that the FDI, just in the case of a personal Ltd., doesn’t need any approval; it is often done directly, unlike in an LLP. Usually, if the promoters or owners of the corporate are NRI’s or a foreigner incorporating a personal Ltd. may be a recommended choice over an LLP. Hence conversion is mandatory if the requirements mentioned above need to be fulfilled.

Benefits of converting LLP into a limited company

  • Easy fundraising
  • Separate legal existence
  • Limited liability of owners
  • ESOPs to employees

Documents required for conversion into a private company

  • Pan card (PAN card of shareholders and directors, foreign nationals may cater a passport)
  • Identity proof
  • Address proof
  • Photograph
  • Business address proof
  • NOC form owners
  • Rent agreement
  • Copy of ITR (a copy of the recent ITR filed by the limited liability partnership.)

Note- In the case of NRI or foreign national, documents of director(s) must be notarized or apostilled.

Procedure to convert LLP into a private company
After obtaining the approval of the name, the applicant must file the shape alongside the documents required with the ROC (Registrar of Companies) within 20 days of the date of approval of the name.

Below is the list of documents that are essential for filing with the ROC for the LLP conversion to the company:

  1. E-form URC-1
    The corporate must file the e-form URC-1 alongside the documents that are mentioned below:
    • A list that conveys the names, addresses, and occupations of the corporate partners alongside shares details that they hold.
    • A list shows the names of the persons who are the company’s first directors.
    • An affidavit should be taken from each and each one that is appointed because the first directors of the corporate during which it must be written that he’s ‘not disqualified from being a director’ as per the sub-section (1) of section 164 and also that the documents that have been certified with the Registrar for registration of the corporate have the right, accomplished and true information as per the understanding and belief.
    • A list restrains the names and addresses of the LLP (limited liability partnership) partners.
    • A duplicate of the agreement of the LLP.
    • The assets and liabilities statement of the LLP (limited liability partnership) appropraitely given by the practice accountant must be made not before the 30 days mentioned after the filing of the shape no. URC-1.
    • A copy of the current ITC (income tax return) of the LLP (limited liability partnership).
    • An agreement that the determined directors of the corporation must follow the wants of the Indian Stamp Act, 1899 (2 of 1899).
    • The agreement or NOC (no objection certificate) must be written from all the applicant’s acquired creditors.
    • The majority of the partners must specify an agreement in writing.
    • A statement containing the given below particulars-
    • The company’s nominal share capital and in what percentage shares it’s dissected;
    • How many shares are taken, and how much is paid on each of the shares.
    • Company’s name alongside the ‘Limited’ or ‘Private Limited’ words added after the name as per the administrators’ need.
  1. E-form INC- 33 / INC-33 / INC-34
    The company must compulsory file the INC-32/ INC-33/ INC-34 forms with the associated forms such as URC-1 and also across with all the documents which are essential in the normal Incorporation of the company such as:

Applicable fee
The fee details for the conversion of the partnership firm into the company are tabulated here. The e-form filing fee rates are provided as per the companies (registration of offices and fees) rules, 2014.

S. No. Nominal share capital Fee applicable
1. Less than Rs.1,00,000 Rs.200
2. Rs.1,00,000 to Rs.4,99,999 Rs.300
3. Rs.5,00,000 to Rs.24,99,999 Rs.400
4. Rs.25,00,000 to Rs.99,99,999 Rs.500
5. Rs.1,00,00,000 or more Rs.600

We assist our clients with registration/ incorporation of LLP, annual compliance with LLPs, setting up their business in India, and compliance related to company incorporation, ROC compliance, company winding-up, etc. If you would like to know more about LLP into a private company, kindly contact us.