Converting Your Private Limited Company to an LLP – A Comprehensive Guide

Partnership Firm with Limited Liability

Introduced by the Limited Liability Partnership (LLP) Act of 2008, an LLP is a corporate organization consisting of two or more partners. It’s a contemporary method of operating partnership firms that blends aspects of partnerships and enterprises. 

The Ministry of Corporate Affairs facilitates the online LLP formation process. LLPs give partners separate legal responsibilities, keeping them from the firm’s commitments. The liability of the LLP is not the same as that of its partners. Businesses with two or more partners prefer LLPs because of their sophisticated operations and cross-location flexibility.

Private Limited Company

A Private Limited Company is a separate legal body with perpetual succession and a common seal established under company law. These firms, governed by the Act of 2013, must be incorporated through the Ministry of Corporate Affairs with a minimum of two directors. 

Directors are distinct individuals with separate legal identities from the company. Private Limited Companies enjoy everlasting succession as corporate bodies and limited liability for their members as artificial legal persons. 

How to Convert a Company Into an LLP

Step 1: Company Board of Directors Meeting

•  Convene the Board of Directors meeting.
• Adopt the necessary board resolution to convert the company to an LLP.
• The required resolution approves any director to submit all the necessary paperwork to MCA.

Step 2: Requesting the Availability of a Name

• To reserve a name, the business must submit form RUN-LLP of LLP and obtain a Name Approval Certificate from ROC.

Step 3: Submitting the Incorporation Form and the Necessary Records

Submit the following attachments along with the e-Form FiLLiP to ROC:

• Provide evidence of the LLP’s registered office (utility bill, NOC, and ownership documentation, for example).
• The forms for subscriptions.
• Assent to function as partners and designated partners.
• Verification of the names and residences of partners and designated partners.
• Information about the LLP(s) and/or company(s) that a designated partner or director is/is a part of.

Step 4: Submitting the Application to Become an LLP

Please submit the E-FORM-18 to ROC with the accompanying attachments:

• A declaration of the shareholders’ consent (mandatory).
• The company’s statement of accounts, attested to by an outside auditor as true and accurate.
• A list of all secured creditors, together with their approval.
• Copy of the most recent income tax return acknowledgment (Required).

Step 5: Obtain an LLP Certificate of Incorporation from the ROC

• After completing the necessary paperwork and receiving Ministry approval, ROC issues a COI for the conversion of an LLP.

Step 6: Limited Liability Partnership Agreement Drafting

Conditions to Become an LLP from Your Private Limited Company

You must meet the requirements listed below to convert your Private Limited Company into an LLP: 

• Obtain the conversion’s approval from the board of directors.
• Make sure the choice aligns with the business’s aims and objectives.
• Use a special resolution to ask shareholders for their support.
• Describe the benefits and rationale for the conversion to the shareholders.
• Apply to reserve the LLP’s intended name.
• Select a name that adheres to the LLP naming guidelines.
• Submit Form URC-1 for approval to the Ministry of Corporate Affairs (MCA).
• Respect the MCA’s specified regulatory standards.
• Take care of any possible hiccups to prevent harmful effects.
• Inform consumers and stakeholders of the change clearly and concisely.
• As required by the LLP Act, draft and submit the LLP Agreement.
• Modify the LLP structure to meet specific business requirements.

Consult with legal and financial professionals for professional advice. If you require assistance with any other legal matter, contact Lawgical Adda. You may seek the revival of a Struck company, relief for directors who have been disqualified, or other legal issues.

Documentation Needed to Convert Your Private Limited Business Into an LLP

The following list includes some of the essential paperwork needed to convert your Private Limited Company into an LLP :

• Board Decision
• Shareholder Approval 
• NOC from Creditors 
• LLP Agreement
• Asset and Liability Statement
• Partners’ Consent
• Capital Statement and Solvency Declaration
• The Auditor’s Certificate and the Designated Partners’ Consent

Conclusion

You must adhere to a systematic procedure to transform and convert your Private Limited Company into an LLP. First, it must be approved by a special resolution from the shareholders and the board of directors. 

Complete necessary steps, like creating the LLP agreement, obtaining NOCs, and reserving a distinctive name for the LLP. Ensure you comply with regulations by filing the required forms with the Registrar of Companies, or RoC. 

Savour advantages include lower operational and regulatory costs, more management flexibility, and less partner accountability. The eligibility requirements are financial soundness, shareholder agreement, and ongoing business operations. 

To put it briefly, converting your Private Limited Company into an LLP involves numerous processes. Additionally, there is no room for error when carrying out the procedure. Therefore, you should engage with a professional who can streamline your tasks.

For more in-depth insights and detailed information on various legal topics, follow Lawgical Adda. Stay updated with the latest articles, expert analyses, and practical advice on corporate law, company regulations, and much more. Join our community and enhance your legal knowledge today!