Partnership firms are easy and quick to form, but they hold one fundamental disadvantage of lack of Limited Liability clause. Which means the partner’s personal assets could be liable for the firm debts. The introduction of Limited Liability Partnership Act 2008 has introduced the concept of a Limited Liability Partnership. The LLP is a big improvement upon a normal partnership; it brings the essence of Limited Liability Clause which was earlier available only to corporate structures. This may be one of the reasons even you are willing to convert your partnership firm into a Limited Liability Partnership.
Can a Partnership firm convert into a Limited Liability Partnership?
Yes, a firm can be converted into an LLP, but there are a few conditions to be fulfilled to get through the conversion.
A few conditions are to be fulfilled to be able to convert the firm into an LLP, such as:
- The LLP should have the same business objects as the Partnership firm.
- The LLP should have same partners as the Partnership Firm.
Procedure for Conversion
- Get Digital Signatures for all the Partners
- Apply for Director Identification number for all the partners
- Apply and reserve the LLP Name (Form 1)
- Draft the required documents, such as:
- LLP Agreement
- Statement Of Assets and liability of the Partnership Firm
- List of Creditors
- Latest Income Tax Returns of the Partnership Firm
- Letter Of Consent from all the Partners
- Letter Of Consent from all the Creditors
- Letter Of Approval from the concerned authority if the Partnership is registered under any act.
- Other Required Documents depending upon the circumstances.
- Once the documents are drafted, we can proceed with conversion by filing the required application regarding the same(Form 17)
- File the details of LLP and the Agreement once the conversion is approved. (Form 2, Form 3 & Form 4)
- Once approved the Ministry will Issue the certificate of Incorporation.
How long should it take?
A typical conversion of a Firm to LLP could take around 20-35 Days depending on the circumstances.
What will happen to all the assets and liabilities of the partnership firm?
All the assets and liabilities of the partnership will stand transferred to the converted Limited Liability Partnership.
Can the LLP have new partners?
Yes and No,
No, you cannot have different partners apart from the original Partnership firm during conversion,
However, you can appoint new partners once the conversion is done.
Am I required to make people known about my conversion?
You are required to attach a statement describing the conversion along with all the important documents of the LLP till 12 months of the conversion.