The most important reason for conversion of a company into an LLP is on the tax front. Currently, the Income-tax Act, 1961, provides for payment of minimum alternate tax (MAT) as also for payment of dividend distribution tax (DDT) by companies. An LLP, which is not a company, should not be liable to pay MAT or DDT.
No Limit on number of shareholders/partners
Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners.
Minimal Compliance Level & Cost effective model
There is no need of compliances related to meetings and maintenance of huge statutory records.
All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP.
No Stamp Duty
All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
No Capital Gain Tax
No Capital Gains tax shall be charged on transfer of property from Company to LLP.
Continuation of Brand Value
The goodwill of the Company and its brand value is kept intact and continues to enjoy the previous success story with legal recognition.
Carry Forward and Set off Losses and Unabsorbed Depreciation
The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.
On Conversion, all the members/shareholders of the company shall become partners of the LLP in the same proportion in which their capital accounts stood in the books of the company on the date of the conversion.
Upto date filing of Income tax returns & Annual returns with RoC
Consent of all the unsecured creditors for the proposed conversion
The partners receive consideration only by way of allotment of shares in LLP
Minimum 2 Designated Partners
Atleast 1 of the designated partners shall be an Indian Resident
If a body corporate is a partner, it has to nominate a natural person as its nominee
The Partners and Designated Partners can be same person
There is no concept of share capital, but there has to be some sort of contribution from each partner
DPIN (Designated Partner Identification Number) for all the Partners
DSC (Digital Signature Certificate) for all of the Designated Partners
Steps in Conversion of Private Limited Company into an LLP
DPIN (Designated Partner Identification Number)
Approved DPIN is a pre-requisite for incorporation process
Application for Name Availability
Filing of Form 1
Documents required for incorporation of an LLP
Form 2 (Statement by Promoter)
Form 3 (Information regarding the LLP Agreement)
Form 4 & Form 9 (Notice of Consent & Appointment of Designated Partners with their personal details)
Subscription sheet signed by the promoters
Duly stamped LLP Agreement
Proof of Address of Registered Office
Filing all the above documents with the ROC
Follow up with the ROC Making changes in LLP Agreement.
Other Incorporation documents as suggested by the ROC