Yes a Limited Liability Partnership can be converted in to Private Limited Company, and many businesses started as Limited Liability Partnership gets themselves converted into Private Limited Company. This conversion is done by virtue of section 366 of The Companies Act 2013.
The advantage of conversion can be for raising more funds from market or for more growth in business or this conversion could be to avail the advantage of Lower tax rates in comparison to Limited Liability Partnership. However this conversion needs some requirements to be fulfilled.
Alonika.in is the right option to begin the journey. Get LLP converted in to Private Limited Company by Professionals like Chartered Accountants and Company Secretaries. Just contact us and stay focused towards the dreams of success.
Documents required for conversion:
| S. No. | Document Required |
|---|---|
| 1. | PAN card &Aadhar card of all Partners |
| 2. | Passport size photograph of all Partners |
| 3. | LLP agreement and Incorporation Certificate |
| 4. | Last Filed ITR of LLP |
| 5. | Current Financial statement |
| 6. | NOC from all Creditors |
| 7. | Approval of all the partners for conversion |
| 8. | News paper cutting for Advertisement of conversion |
| 9. | DIN and DSC of all Partners |
| 10. | Address proof of place of business (Rent deed / Electricity Bill or Registry deed / NOC) |
Advantages of Conversion of LLP to Private Limited Company
EASY FUND RAISING: In compare to LLP fund raising is easier for Private Limited Companies and always preferred by investors.
ESOP options: Only a company can offer ESOP to employees, helps in building confidence of employees in the management and allow them to feel like more than just employee thus results in best outputs.
Lower Tax Rate: Income Tax Rate is lower for a company in compare to a LLP.
Process of Conversion
- Holding the meeting of all partners for the consent of conversion of LLP into Private Limited Company.
- Filing RUN application for availability of name. Business can be run in the same name subject to availability and in place of LLP, Limited or Private Limited will be used as suffix.
- Company required filing e-form URC- 1 along with all the below mentioned documents:
- A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them
- A list showing the particulars of persons proposed as the first directors of the company
- An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub-section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief
- A list containing the names and addresses of the partners of the Limited Liability Partnership
- Copy of LLP Agreement
- A statement of assets and liabilities of the Limited Liability Partnership duly certified by a chartered accountant in practice which is made as on a date not earlier than thirty days of the filing of form no.URC-1
- A copy of latest income tax return of the Limited Liability Partnership
- An undertaking that the proposed directors shall comply with the requirements of Indian Stamp Act, 1899 (2 of “1899)
- Written consent or No Objection Certificate from all the secured creditors of the applicant
- Written consent from the majority of Partners
- A statement specifying the following particulars:—
- the nominal share capital of the company and the number of shares into which it is divided;
- the number of shares taken and the amount paid on each share;
- the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof;
- Filing of MOA and AOA with Registrar of Companies.
Frequently Asked Questions
What are the steps required for incorporating a Private Limited Company in India?
The steps for incorporating a Pvt Ltd company are as follows:
- Getting DSC(Digital Signature Certificate) and DIN(Director Identification Number)
- Approving the name of the Company
- registering the Company address
- Drafting MOA(Memorandum Of Association) & AOA(Article of Association)
- Filing of e-form(INC-7) with the ROC(Registrar Of Company)
- payment of ROC fees & getting a stamp on the documents.
- verification by the ROC
- Finally the certificate of incorporation to be given by ROC
Can LLP (Limited Liability Partnership) be converted to Private Limited Company?
No, LLP cannot be converted to a Private Limited Company as it is not permissible by the government of India. Both the LLP Act, 2008 and the Companies Act,2013 are silent about the matter and haven\'t done any amendments on the same. However, if you want to expand your business you can register a Private Limited Company with INC-29 which has simplified the process of registration.
Ministry of Corporate Affairs has passed a notification on 31st May, 2016 in such notification its allowed conversion of LLP into Company. For such conversion there is need to prepare a list of documents and required to file the same with ROC in forms like URC-1, INC-32, INC-33 and INC-34 etc. While conversion there is need to consider the implications of income Tax provisions also like Capital Gain. In below mentioned article author attempt to cover up the provisions of Companies Act and capital gain implication while conversion from LLP to Company.
Why Private Limited Company is the choice for Start-ups?
For the proper execution of the idea choosing the right form of business is important and for start-ups Private Limited is the best option for the following reasons:
- Legal Compliances
- Number of people required are low
- Funding requirements can be fulfilled with the help of shareholders and financial bodies.
- Limited liability of the members
- Growth of Business can be done by converting a Private Limited to a Public Limited, but an LLP cannot be converted to a Private Limited hence it restricts the growth.
- Even though Private Limited Company is expensive but to execute the Big idea into a successful long term business Private Limited Company is the best choice for start-ups.
How long is the company valid for?
Once a Company is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time.
Is an office required to open a company?
No You can open a company to your residential address there is no requirement to have a commercial place to open up a company
For Registered Office Address
- Rent agreement along with latest rent receipt (in case the premises are rented)
- House tax receipts (in case premises are owned)
- Electricity bill
- NOC from the Owner (Format will be shared once your company name approved)
What are the basic requirements for naming a Company?
First ensure that company name is not similar to any other Private Limited, OPC, LLP or Public limited company. Also, do check for a registered trademark taken by anybody under The Trademark Act. Also, make sure the name is not too generic to be accepted by the ROC and also, try not to use abbreviations, adjectives. While choosing the name make sure that name should contain the objective of the business like if the objective is IT then word is Technology, Technosoft, IT consultancy etc.
What is PAN?
It is a unique 10-digit alphanumeric identification that is issued to each and every taxpayer, may it be Business, Individual, HUF(Hindu Undivided Family), Trusts, Foreign Citizens and more. This PAN number and the card is issued by the Income Tax Department which is of extreme importance as identity form. This card is used by the Income Tax department to keep a check on the transactions that can carry a taxable component. PAN card id required as evidence/proof/identity and even in transactions that is associated with a high value.
What is TAN?
A 10 digit alphanumeric number is issued by the Income-tax department which is known as Tax Deduction Account Number or Tax Collection Account Number(TAN). Any person who is responsible for deducting tax at source (TDS) or who are required to collect tax at source (TCS) needs to have a TAN.
What is DSC?
Digital Signature Certificates (DSC) is an electronic format of a certificate that represents the physical form of a certificate. These are specific certificates which give you authority to access information or services on the Internet or to sign legal documents. It works as a proof for the identity of a person example of certificates can be like a driving license, passport or any membership certificates. It\'s the same way as the physical documents are signed manually, the electronic documents, like e-forms, are signed by using a Digital Signature Certificate.
What is DIN?
Director identification number is the unique number that is issued to existing Director or a Future Director of a Company. It is required to be submitted during the procedure for company registration. And for further if a person wants become director in any existing company it requires DIN before appointing as director of the company.
What is a Stamp Duty?
It is a tax that is demanded on documents. The stamp duty includes majorly the legal documents such as cheques, military commissions, marriage license, receipts and land transactions. When a physical stamp is attached to the document, it is denoted that, the stamp duty had been paid for particular document which was effective legally.
Do I need a Chartered Accountant to register my company
Yes, a chartered accountant is important for a company registration, as it provides general accounting, internal auditing, accounting, outsourcing, income tax advisors, tax planning, etc.
Can a government servant, start his/her own company?
It is a strict No, a government employee cannot run a business or do a part time job and for that matter anything except the designated work in the government.
What is a Share Certificate?
It is a written document which is signed on behalf of a corporation/company to serve as a legal proof of ownership of shares/stock that the company indicates to have. It is also termed as Stock Certificate.
When to appoint a CS in company?
Every company having a paid-up capital of Rs. 10 crore needs to have a whole time CS official as per the new amendment in the Company Act 2013.
Difference between Private Limited and Public Limited Company?
Here is a list of features that differentiate a public company from a private limited company:
| Features | Public Limited Company | Private Limited Company |
|---|---|---|
| Minimum members | 7 | 2 |
| Minimum directors | 3 | 2 |
| Maximum members | Unlimited | 200 |
| Invitation to public | Yes | No |
| Issue of prospectus | Yes | No |
| Quorum at AGM | 5 members | 2 members |
| Term used at the end of name | Limited | Private limited |
| Managerial remuneration | Cannot exceed more than 11% of net profits | No restriction as such |
| Statutory meeting (mandatory) | Yes | No |