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.
We are a professional consulting firm specialising in company registration, taxation, accounting, payroll, compliance, and intellectual property rights (IPR) services to assist new and existing businesses in India. We provide our professional services at a reasonable fee, explaining the eligibility, process, and documents required for setting up and maintaining a business. We also prepare and file necessary applications with relevant government agencies such as the Registrar of Companies (ROC) and the Income Tax Department. We do not directly provide government documents or represent ourselves as a government agency.
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; Setindiabiz Provides end to end service about the conversion of the LLP into a Pvt Ltd Company.
The LLP must have at least two partners for its conversion as a Private Limited CompanyAll 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.
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.
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.
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.
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.
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.
| Law or Form | Particulars |
|---|---|
| Law | Section 366 of the Companies Act, 2013 |
| Form URC-2 | Format for Newspaper Publication |
| RUN | For filing Name Reservation Application |
| Form URC-1 | Application for Conversion from LLP to Company |
| Spice+ Form | For new Company Certificate of Incorporation |
| DIR-2 | Consent of Directors |
