Friday, 11 April 2014

Method of Converting Partnership into LLP

To convert partnership firm into limited liability partnership (LLP) one needs to comply with various requirements. The procedure for conversion of Firm into LLP is not a cumbersome process, one need to just comply with the legal & procedural formalities which are described as under –
Some of the pre-requisites for conversion are as follows
  • Partnership firm to be registered under Indian Partnership Act 1932.
  • The partners of the firm should become the partners of LLP on its conversion.
  • The designated partners should receive their DIN (Director’s Identification Number) on conversion.
  • Minimum of 2 designated partners should be appointed and one of them to be resident of India.
  • LLP agreement
  • Name of proposed LLP (Limited Liability Partnership).
  • Registered office of the existing partnership firm.
The steps for conversion of Firm into LLP (Limited Liability Partnership) is as follows
1. Obtain DIN (Director’s Identification Number) – Obtaining DIN of the partners is a pre requisite in conversion of firm into LLP. Every partner should obtain DIN and get it approved.
2. File Form 1 (Name approval) – Form 1 to be filed in order to get the name of LLP approved. Addition of the word “LLP” at the end is allowed in the existing name of the Firm to be converted.
3. Draft the LLP agreement – The next step is to draft the LLP agreement through which mutual rights & duties of the partners are being governed. The basic content of LLP agreement are: name of LLP, name of partners & designated partners, profit sharing ratio, proposed business rules for governing the LLP, forms of contributions etc.
4. File Form 17 (Application for Conversion) – Application for conversion in Form 17 is required to be filed by the partners along with the following attachments –
  • Statement of partners
  • List of all unsecured creditors along with their consent to conversion
  • Statement of assets & liabilities of the company duly certified by a CA.
5. File other forms – File Form 2 (Details of partners, registered office), 3 (Information in respect to LLP agreement) &Form 4 (Information with regard to designated partners etc) as required in the LLP Act.
6. Issue of Certificate of Registration – After all aforesaid formalities have been complied with, the ROC shall issue a certificate of incorporation (COI) to the proposed LLP.
7. Intimate the Registrar of Firms – Within 15 days from the date of conversion intimate the Registrar of firms that the partnership firm has been converted to LLP. Also file the particulars in respect of Limited Liability Partnership in e- Form 14.

Once all the above steps have been complied with, the Partnership Firm shall be converted into Limited Liability Partnership (LLP) and shall follow rules & regulations as applicable to LLPs.

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