Partnership to LLP

Overview of converting Partnership to LLP

It is often more advantageous to form a Limited Liability Partnership (LLP) than to form a regular partnership. Individual partnerships are affected by personal liabilities, while Limited Liability Partnerships eliminate excessive Indian Partnership Act, 1932 regulations. Additionally, there are tax benefits, no audit requirements below a certain capital, and no caps regarding the number of partners.

Benefits of a Limited Liability Partnership

Separate Legal Entity:

• LLPs are separate legal entities from their partners. It is possible for either partner to sue the other in the event of a dispute.
• In other words, the business has an uninterrupted existence that follows perpetual succession; that is, even if the partners leave, the business will continue to exist. To dissolve the firm, it is compulsory to mutually agree to its dissolution.

Flexible Agreement:

It is easy to transfer ownership in the case of an LLP. A person can be proposed and approved by a designated partner at any point in time, and the owner can be transferred.

Suitable For Small Businesses:

• An LLP with a capital of fewer than 25 lakhs and a turnover of fewer than 40 lakhs is not required to conduct an audit. Small businesses and startups can benefit from registering as LLPs.
• As an LLP is considered a juristic person, it can acquire a property in its name. The partners have no rights over that property.

No Owner /Manager Distinction:

Partners own and manage the LLP. In contrast, a private limited company has directors that can be different from shareholders. Venture Capitalists hesitate to invest in LLPs for this very reason.

Checklist for an LLP in India

Separate Legal Entity:

• As far as internal management, profit distribution, and tax liabilities are concerned, an LLP is similar to a normal partnership structure. The partners, however, are subject to limited liability.
• LLPs require a minimum of two partners, and there’s no maximum limit for the partner count.
• Shared Capital is not required. However, partners should have an agreed contribution.
• Minimum capital contribution: LLP should have an authorized capital of a minimum of Rs. 1 lakh. There’s no minimum capital amount.
• One of the partners must be an Indian Citizen.
• All Partners should have DPIN and DSC.
• An LLP does not need a commercial space for its registered office. If a landlord grants an NoC, a rented home can serve as the registered office.
• Due to the changes in FDI regulations dated November 10, 2015, foreign investors can now have 100% FDI automatically. 100% FDI in LLP can be granted to foreign companies that operate in activities or sectors where 100% FDI is permitted by the automatic route. Furthermore, there should be no performance requirements linked to FDI. Referring to the LLP, definite interpretations have been provided of terms such as ‘internal accruals’ and ‘ownership and control.’ With FDI in LLP, foreign investment becomes a lot smoother and faster.
• It will also be possible for LLPs to invest downstream in another company or even choose to invest in sectors that allow 100% FDI in accordance with the automatic route. This does not come up with any performance constraints that are FDI-linked.

Steps for Conversion of Partnership Firm Into LLP

The steps are as follows:-

Step 1: Obtaining DSC And DIN

In order to form a Limited Liability Partnership, you must obtain the DSCs of the desired partners. The director’s Digital Signature Certificate is required to file compliances online. It is mandatory, as per the law, to apply for DIN if you are a director of an LLP. The application must be submitted in Form DIR-3.

Step 2: Application For Name Approval

LLPs must be registered through this process. You can start by checking the MCA portal to see if the name is already taken. Only names that have not already been taken by another LLP are approved by the Registrar.

The Registrar will approve the name only if the Central Government does not deem it undesirable. It should also not be similar to any existing partnership firms, LLPs, trademarks, or corporations.

Step 3: LLP Agreement

As a limited liability partnership, an LLP agreement determines the rights and responsibilities of the partners as well as between the LLP and the partners. By filing form 3 online on the MCA portal, the partners enter into the LLP agreement. Within 30 days of incorporation, this procedure must be completed.

Step 4: LLP Incorporation Certificate

Your LLP will be registered once the Registrar approves your MOA and AOA. Next, obtain the LLP Incorporation Certificate. It can be done by submitting all the documents to the Registrar. There is a time frame of two to twelve days. Incorporate your LLP once you receive your LLP Incorporation Certificate.

Step 5: Obtain PAN, TAN and a Bank Account

You must apply for your company PAN & TAN with the NSDL as soon as you get the incorporation certificate. It will take around three weeks.

Documents required for LLP registration in India

The method of LLP registration in India does not require much legwork when it comes to documents.

To Be Submitted By Partners

• Scanned copy of PAN Card or passport (Foreign Nationals & NRIs)
• Scanned copy of Aadhar Card/Voter’s ID/Passport/Driver’s License
• Scanned copy of latest bank statement/telephone/mobile bill or electricity/gas bill
• Scanned passport-sized photograph Specimen signature (blank document with signature [partners only])
• Note: Any one of the partners must self-attest the first three documents. In the case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).

For Registered Office

• Scanned copy of the latest bank statement/telephone/mobile bill, or electricity or gas Bill
• Scanned copy of the notarised rental agreement in English
• Scanned copy of the No-objection certificate from the property owner
• Scanned copy of sale deed/property deed in English (in case of owned property)

Frequently Asked Questions