The concept of converting a Private Limited Company into a Limited Liability Partnership (LLP) is gaining popularity among entrepreneurs and businesses. LLPs offer a flexible structure that combines the benefits of a partnership and a corporate entity, making it a preferred choice for businesses looking to simplify compliance, reduce costs, and enjoy the advantages of limited liability.
This blog provides a comprehensive guide on the process, requirements, and benefits of converting a Private Limited Company into an LLP.
Table of Contents
1. Documents Required for Conversion of Company into LLP2. Eligibility Criteria for Conversion of Company into LLP3. Procedure for Conversion of Private Limited Company to Limited Liability Partnership (LLP)4. Fee Payable for Conversion of Company into LLP5. Certificate of Registration LLP6. Taxation on the Conversion of a Company into an LLP7. Pursuant to the Income Tax Act8. Benefits under the Income Tax Act9. Conclusion10. Frequently Asked QuestionsDocuments Required for Conversion of Company into LLP
Below, we’ve outlined the key documents required to make the conversion process smooth and efficient.
1. Documents for Directors/Partners
PAN Card (self-attested).
Identity Proof: Aadhaar Card, Passport, or Voter ID (self-attested).
Address Proof: Latest utility bill, bank statement, or rental agreement (self-attested).
Digital Signature Certificate (DSC) for at least one designated partner.
2. Documents for the Company
Incorporation Certificate of the Private Limited Company.
Memorandum of Association (MoA) and Articles of Association (AoA).
Latest financial statements of the company.
Income tax returns for the previous three years.
3. Other Requirements
No Objection Certificate (NOC) from creditors.
Consent from shareholders for the conversion.
Approval or clearance certificates from regulatory bodies, if applicable.
Eligibility Criteria for Conversion of Company into LLP
Setting up an NGO provides individuals and groups with a structured platform to:
The company should not have secured debts or must obtain the consent of secured creditors for the conversion.
All shareholders of the company must agree to become partners in the LLP.
The company must comply with the provisions of the Companies Act of 2013 and the LLP Act of 2008.
There should be no pending legal proceedings against the company.
The company must not be engaged in certain restricted sectors under law.
Procedure for Conversion of Private Limited Company to Limited Liability Partnership (LLP)
Step 1: Obtain Board Approval
Convene a board meeting to pass a resolution approving the company's conversion into an LLP.
Authorise directors to file necessary applications and documents with the Registrar of Companies (RoC).
Step 2: Apply for Name Reservation
File "RUN-LLP" (Reserve Unique Name for LLP) to reserve the name of the proposed LLP.
Ensure that the name is unique and complies with naming guidelines.
Step 3: File Form FiLLiP and Form 18
Prepare and file the following forms with the Ministry of Corporate Affairs (MCA):
Form FiLLiP: Incorporation form for the LLP.
Form 18: Application and statement for converting a Private Limited Company into LLP.
Attach required documents, including incorporation certificate, resolution copy, and consent letters.
Step 4: Verification and Approval
The RoC reviews the application and verifies submitted documents. Any discrepancies must be addressed promptly.
Step 5: Issuance of Certificate of Registration
Upon approval, the RoC issues the Certificate of Registration for the LLP, signifying the completion of the conversion.
Fee Payable for Conversion of Company into LLP
Government Filing Fees
Filing fees for Form FiLLiP and Form 18 (vary based on the company’s authorised capital)
Stamp duty on the LLP Agreement (varies by state).
Notary and attestation charges, if applicable.
Professional Service Charges
Fees for professional services, including documentation, form filing, and legal consultation.
Certificate of Registration LLP
The Certificate of Registration is issued by the Registrar of Companies upon successful conversion. It serves as the legal proof of conversion and includes:
LLP Identification Number (LLPIN).
Date of registration and conversion.
This certificate is essential for updating all statutory registrations and notifying stakeholders about the change in business structure.
Taxation on the Conversion of a Company into an LLP
The conversion of a Private Limited Company into an LLP has specific taxation implications:
Capital Gains Tax: Exempted under certain conditions as per the Income Tax Act.
Goods and Services Tax (GST): GST registrations must be migrated to the LLP.
Transfer of Assets and Liabilities: Tax neutrality applies if all conditions are met during the conversion.
Pursuant to the Income Tax Act
The Income Tax Act governs the conversion of companies into LLPs under Section 47(xiiib). Key provisions include:
All company assets and liabilities must be transferred to the LLP.
All shareholders must become partners in the LLP.
The total turnover of the company in any of the previous three years must not exceed ₹60 lakh.
There must be no consideration other than the partner’s capital contribution to the LLP.
Benefits under the Income Tax Act
Converting a company into an LLP offers several tax benefits:
Exemption under Section 47(xiiib): No capital gains tax on transferring assets and liabilities.
Carry Forward of Losses: Business losses and unabsorbed depreciation can be carried forward to the LLP.
Conclusion
The transition from a Private Limited Company to an LLP offers businesses a chance to rethink their structure and embrace greater flexibility. LLPs allow for easier decision-making, lower compliance costs, and better resource allocation—all while retaining the benefits of limited liability.
This makes it an ideal choice for businesses looking to streamline operations, whether they are startups, small firms, or professional partnerships.
Frequently Asked Questions
Can a company be converted to LLP?
Yes, a Private Limited Company or an Unlisted Public Company can be converted into a Limited Liability Partnership (LLP). This conversion is governed by the Limited Liability Partnership Act of 2008 and is subject to certain conditions. For instance, all company shareholders must become partners in the LLP, and there should be no pending debts, charges, or unresolved legal disputes.
The conversion helps businesses simplify compliance, reduce costs, and enjoy the flexibility of an LLP structure while retaining limited liability protection.
What is Section 47 conversion of a company to LLP?
Section 47 of the Income Tax Act of 1961 provides tax neutrality during the conversion of a Private Limited Company or an Unlisted Public Company into an LLP. It ensures that the conversion does not attract capital gains tax if specific conditions are met, such as:
All the company's assets and liabilities are transferred to the LLP.
All shareholders of the company become partners in the LLP with the same profit-sharing ratio.
The company's turnover in any of the three preceding financial years does not exceed ₹60 lakh.
The company’s shareholders do not receive any consideration other than their share in the LLP.
What are the forms for conversion of a company into LLP?
To convert a company into an LLP, the following forms must be filed with the Registrar of Companies (ROC):
RUN-LLP: For reserving the name of the LLP.
Form FiLLiP: For incorporation of the LLP and application for DIN (Director Identification Number), if required.
Form 18: For the conversion of the company into an LLP, along with necessary declarations, resolutions, and supporting documents.
Form 3: For filing the LLP agreement after the conversion is approved.
Each form must be filed with the prescribed fees and accompanied by required documentation.
How much does it cost to convert Pvt Ltd to LLP?
The cost of converting a Private Limited Company to an LLP includes the following components:
Government Fees
Professional Fees
The total cost of conversion typically depends on the company's authorised share capital, additional legal services, stamp duty, etc.
How long does it take to convert Pvt Ltd to LLP?
The process of converting a Private Limited Company to an LLP usually takes 10-15 days, provided all the documents are in order, and there are no objections from the Registrar of Companies (ROC). Delays may occur if incomplete documents or objections are raised during scrutiny.
What is the turnover limit for Pvt Ltd to LLP conversion?
The turnover limit for a Private Limited Company to be eligible for conversion into an LLP is ₹60 lakh in any of the three preceding financial years.
Additionally, the company should not have a paid-up share capital exceeding ₹50 lakh.
