LLP Conversion into Company

Introduction

An alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership is known as limited liability Partnership (LLP). The LLP can continue its existence irrespective of changes in the partners; it is capable of entering into a contract and holding property in its own name. Mutual rights and duties of the partners within an LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be.

LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

It is a form of business which is came into existence through the LLP act 2008. It is a form of business having separate legal entity, is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution in the LLP.

Private Limited company

Under section 2 (68) of company act, 2013 Private company mean company incorporated under company’s act 2013 having paid-up share capital as may be prescribed, and which by its articles, —

1. Restricts the right to transfer its shares:
2. Except in case of OPC, limits the number of its member to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purpose of this clause, be treated as a single member:

Provided further that-

1. A person who is in the employment of the company
2. persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and
3. Prohibits any invitation to the public to subscribe for any securities of the company​

It is a form of business which is came into existence through company's act. It is a form of business having separate legal entities form its promoter just like other forms of company.  The main advantage of a Private limited form of company is that the financial liability of a shareholder is limited to their shares.

One person company can convert itself into a private limited company after complying with the provision led down under company law 2013.

There is the provision of conversion of existing LLP into a Private Limited Company after complying the provision led down under the act.

Procedure for conversion of LLP

1. Call a partner meeting to approve the majority of its members summoned to register the LLP in compliance with Section 366 of the Companies Act, 2013. To allow one or more partners to take all required steps and to carry out all papers work, actions, records for registering LLP as a company.
2. LLP Have to request Name Availability in RUN. One of the key benefits is that the company can be run under the same name as the LLP (subject to availability of name as specified in the Companies Act's Name Availability Guidelines) except that the words 'limited' or 'private limited' must be added in addition to the name of the LLP.
3. The company need to file e-form URC-1 along with attachments mentioned below;

1. A list showing the names, addresses, and occupations of all individuals identified as members with descriptions of their shares
2. A list specifying the individuals proposed as the company's first directors
3. An affidavit from each of the individuals proposed as the first directors that he is not excluded as a director pursuant to subsection (1) of section 164 and that all records filed with the company registrar contain information that is correct and complete and that is valid to the best of his knowledge and belief.
4. A file containing the names and addresses of Limited Liability Partnership members
5.  Copy of the LLP Agreement
6. A Statement of Assets and Liabilities of a Limited Liability Partnership duly certified in practice by a Chartered Accountant, as of the date no earlier than thirty days after filing of Form No. URC-1
7.  A copy of Limited Liability Partnership's income tax return
8. NOC from all creditors of LLP
9. Consent form the majority of partner
10. LLP need to file INC-33/34 (memorandum of association and article of association) along with URC-1
11. INC-9 & DIR-12

Advantages of Conversion;

• No capital gain will be charged
• After conversion, LLP can issue shares and debentures
• Better credibility