A partnership firm is an organization which is formed with two or more persons to run a business with a view to earn profit. Partnership is the result of contract. It does not arise from status, operation of law inheritance. Thus, in the death of a father who was a partner in the firm, son can claim a share in the partnership property but cannot become partner unless he enters into a contract. One of the disadvantages of this business entity is that unlimited liability. All partners are equally liable for the debts and losses of the firm. No matter, the cause of the debt or loss is only person. The unlimited liability is one of the most common reasons why people convert switch from partnership firm into LLP. Because an LLP is a form of partnership where a partner is not liable for the malpractice of another person in the company. The partnership of the LLP is having limited liability which means partners are not liable to pay the debt of another partner in the company. Another reason to convert partnership firm into LLP is that partnership firm is not a legal entity, the voluntary registration is not required to run the business. Whereas the LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited.
Are you running a partnership firm and want to convert into an LLP? If yes, you have come to the right place. In this article, we are going to tell you the procedure of converting a partnership firm into an LLP. So, let’s get started.
Basic requirements to convert existing partnership firm into LLP:
Digital signature: In a partnership firm the partners would not have a digital signature to register a firm. However, at the time of conversion the digital signature would be required for all partners.
DIN: Partners in an LLP or directors in a Private Limited Company requires a DIN/DPIN. A DIN is a unique number given for each person who is an LLP or director. Once DIN/DPIN number is issued, it can be used for a lifetime without any renewal.
Name Approval: Once digital signature, and DIN number are issued, application for name approval can be made to the Ministry of Corporate Affairs. Before deciding the name of the LLP, you need to follow some guidelines of the companies Act 2013.
Documents Required For LLP Registration
Latest passport size Photographs of all partners
PAN ( Permanent Account Number) of all Partners (Minimum 2)
Identity Proof of each partner, (Aadhar Card, Passport, Driving License or Voter ID Card)
Address Proof of all partners (Bank Statement or Passbook, electricity bill, telephone bill, Aadhar card or any utility bill)
Copy of Mobile bill, telephone bill, electricity bill or Bank Statement of all Partners with Present address
Registered Office Address Proof – Electricty Bill along with Rent Agreement / ownership proof of proposed registered office.
Stamp paper for LLP Agreement of State where LLP is to be Incorporated
Documents Must be self attested
Steps for converting a partnership firm into LLP:
Step 1 - Deciding Partners and Designated Partners
Step 2: Obtaining DPIN and Digital Signature (Obtaining DPIN for a DP in LLP is restricted by MCA till 31 March 2018)
Step 3: Checking availability of desired name and reserving it with ROC
Step 4: Filing of incorporation and conversion documents
Step 5: Obtaining certificate of registration
Step 6: Drafting of LLP Agreement
Step 7: Filing LLP Agreement with Registrar of Companies
Filing LLP Form-17- Conversion of partnership into LLP.
LLP Form 17 is the application form which must be filled along with the incorporation application and subscriber sheet while converting a firm into LLP. Further, the documents are required to filled this form are listed below;
Key Comparison between LLP, Partnership firm:
Basis for comparison |
LLP |
Partnership firm |
Meaning |
Limited Liability Partnership is the form of business entity which combines the features of a partnership and body corporate |
Partnership firm refers to an Agreement where in two or more persons agree to run a business and share profit and loss mutually |
Legislation |
Limited Liability Partnership Act, 2008 |
Indian Partnership act, 1932. |
Registration |
Mandatory |
Optional |
Charter document |
LLP agreement |
Partnership deed |
Liability |
Limited liability |
Unlimited Liability |
Legal status |
It has a separate legal status. |
Partners are collectively known as firm, so there is no separate legal entity. |
Audit of account |
Mandatory, only if turnover and capital contribution overreaches 40 lakhs and 25 lakhs respectively |
Not mandatory |
Relationship |
Partners are agents of LLP only. |
Partners are agents of firm and other partners as well. |
Why LLP is better than a partnership firm?
Final Say:
I hope now you understand the procedure of conversion partnership into an LLP. So, if you want to convert your existing partnership firm into LLP, feel free to contact to Unilex Business Consultant. Here, the professionals are always ready to help you regarding any business entity and offer you the
satisfactory outcomes. To get in touch with us, all you need dial our number or come to our
office and share all your details with our professionals. As soon as we receive your
requirements, we will work on it and offer you great satisfactory solutions.
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