Find here the advantages of conversion of Private Limited Company to Limited Liability Company LLP in India along with procedure, documents required, eligibility and other details.
The primary difference between an Limited Liability Partnership LLP and a Private Limited Company lies in the internal governance structure of the concerned firm. The structure of an Limited Liability Partnership LLP is such that it acts as both a company and a partnership. The characteristics of separate legal entities and limited liability remain the same but the operational flexibility of the business gains an impetus.
The management as well as the operations are handled by the partners, and the duties are well defined as per the LLP Agreement that’s mutually agreed upon by all the partners. A conversion to LLP provides enough credibility to a company and also adds the benefits of a partnership. Hence, it is a good decision to convert a Private Limited Company to an LLP. You can apply for the same with Seedup.in in a few simple steps.
Reasons why should consider converting a Private Limited Company to Limited Liability Partnership LLP in India
- Limited and independent liability – In LLPs, one partner is not responsible or in any way liable for the misconduct of another partner. This means in LLPs, there is no concept of joint liability and the partners are protected under this business structure.
- The partners receive rewards – Renumeration, share of the profit as well as the interest on capital is also received by the partners of an LLP. The share of the profit is a part of the profit generated from all the business activities. However, the remuneration on the other hand is paid for active participation in the business by the partners.
- Greater Operational Flexibility – An LLP functions according to the clauses of the LLP Agreement that are decided upon mutually by the partners themselves.Here, the partners are associated with the everyday operations as well as management, unlike a Private Limited Company.
- Relaxed Statutory Compliances – Private Limited Companies have a long list of compliances to be followed. On the other hand, in case of LLPs, it isn’t mandatory to maintain any statutory records or registers. The provision of statutory audit is also relaxed here.
Criteria for converting a Private Limited Company to Limited Liability Partnership LLP in India
- All members of the Private Limited Company have to become the partners of the Limited Liability Partnership LLP at the time of conversion.
- No security interest in the assets of the company is subsisting or in force on the date of conversion.
- Up to date ITR has been filed.
- Clearance, or approval for conversion of the company into Limited Liability Partnership, if required from any authority, etc. has already been obtained.
List of Required Documents to convert Private limited company to Limited Liability Partnership LLP in India
- PAN Card, Certificate of Incorporation, documents related to GST registrations, etc of the Private Limited Company.
- DSC of all the preexisting directors.
- NOC from all the shareholders and directors of the company for the conversion into LLP.
- NOC from tax authorities.
- Consent from the entire list of creditors.
- ITR documents along with the financial statement of the prior year.
Procedure for conversion of a Private limited company into Limited Liability Partnership LLP in India with seedup.in
- Fill the forms – The first and foremost step requires you to fill out the questionnaire, submit the required documents, and receive assistance and consultation for the conversion.
- Name Reservation – The next step is to apply for the reservation of the name of the LLP.
- Filing LLP forms – After that, the incorporation documents have to be drafted and the LLP Form 17 application for conversion into LLP and later the online filing of LLP Form 2.
- Application for change in PAN and TAN – Once the LLP forms are processed, the next step is to apply for the change in TAN and PAN.
- Drafting LLP Agreement – The drafting of the LLP Agreement is the next step that happens with proper consultation of all the stakeholders.
- Filing of the LLP Agreement – The last step is filing the LLP Agreement with the MCA and waiting until the government processing time is over.
This entire procedure will take around 20-25 working days.