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Partnership and LLP Conversion Compliance
Partnership and LLP Conversion Compliance refers to the legal process of converting a traditional partnership firm into a Limited Liability Partnership (LLP). This transition is governed by the Limited Liability Partnership Act, 2008, the Companies Act, 2013, and other applicable regulations. The conversion ensures limited liability for partners and offers a more structured and flexible business format.
Converting a partnership firm to an LLP provides the benefits of limited liability, better governance, and perpetual succession. An LLP combines the advantages of both partnerships and companies, making it an ideal structure for growing businesses.
Importance
1. Limited Liability : Protects the personal assets of partners from business liabilities.
2. Perpetual Succession : Ensures continuity of business irrespective of changes in partnership.
3. Improved Credibility : Enhances market reputation and investor confidence.
4. Ease of Compliance : LLPs enjoy simplified compliance compared to companies.
5. Tax Benefits : Offers specific tax advantages under the Income Tax Act.
Applicability
1. Existing Partnership Firms : Firms registered under the Indian Partnership Act, 1932.
2. Small and Medium Enterprises (SMEs) : Firms registered under the Indian Partnership Act, 1932.
3. Startup Firms : Opting for LLPs to attract investors and simplify compliance.
Key Compliance Requirements
1. Approval from Partners : All partners must consent to the conversion.
2. Name Reservation : File RUN-LLP (Reserve Unique Name) to secure the LLP name.
3. Filing for Conversion : Submit Form FiLLiP (Form for Incorporation of LLP) and Form 17 for conversion.
4. Drafting LLP Agreement : Define rights, duties, and profit-sharing ratios in the agreement.
5. Transfer of Assets and Liabilities : Ensure all assets, liabilities, and contracts are transferred to the LLP.
6. Registrar of Firms Notification : Inform the Registrar of Firms about the conversion.
7. Update Statutory Records : Update tax registrations (GST, PAN, TAN) and banking details.
8. Public Notice of Conversion : Notify creditors and the public about the conversion.
Documents Required
Features
Features & Benefits of Partnership and LLP Conversion Compliance
Perpetual Succession
Simplified Compliance
Flexible Structure
Seamless Asset Transfer
Partnership and LLP Conversion Compliance
Enhanced Credibility
Digital Filing Process
Single Taxation Level
No Minimum Capital Requirement
Exemption from Audit (for Small LLPs
Comparison with Related Services
| Feature | Partnership Firm | LLP | Private Limited Company |
|---|---|---|---|
| Liability Protection | Unlimited | Limited | Limited |
| Perpetual Succession | No | Yes | Yes |
| Taxation | Individual level | Individual level | Corporate tax |
| Compliance Burden | Low | Moderate | High |
| Statutory Filings | None | Annual ROC Filings | ROC and MCA Filings |
Frequently Asked Questions
Can all partnership firms be converted into LLPs?
Yes, any partnership firm registered under the Indian Partnership Act, 1932, can be converted into an LLP, provided all partners consent.
What happens to liabilities during the conversion?
All liabilities of the partnership firm are transferred to the LLP, and partners are not personally liable.
Is a new PAN required for the LLP?
Yes, the LLP must obtain a new PAN as it is a separate legal entity.
What is the fee for conversion?
The ROC filing fees vary based on the authorized capital of the LLP.
How long does the conversion process take?
The process typically takes 4-6 weeks, depending on document preparation and ROC approval.
Can the LLP continue the business of the partnership firm?
Yes, the LLP can carry on the same business without any interruption post-conversion.