In the dynamic business landscape of Bangalore, companies often find themselves exploring different structures to optimize operations and align with their evolving goals. One such transition that many companies consider is converting from a Private Limited Company to a Limited Liability Partnership (LLP). This shift can offer various advantages, including greater flexibility, reduced compliance requirements, and tax benefits. In this article, we'll delve into the process of converting a Private Limited Company to an LLP specifically in Bangalore, outlining the steps involved and key considerations.
Understanding the Basics
Before delving into the conversion process, it's crucial to comprehend the fundamental differences between a Private Limited Company and an LLP.
Governed by the Companies Act, 2013.
Separate legal entity distinct from its shareholders.
Requires a minimum of two directors and two shareholders.
Compliance requirements include annual filings, board meetings, and statutory audits.
Taxed at a corporate tax rate.
Governed by the Limited Liability Partnership Act, 2008.
Combines features of a partnership and a company.
Partners have limited liability, similar to shareholders in a company.
Requires a minimum of two partners.
Less stringent compliance requirements compared to a Private Limited Company.
Taxed at a lower rate than companies.
Converting a Private Limited Company to an LLP involves several steps, including regulatory filings and approvals. Here's a comprehensive overview:
Board Resolution: The directors must convene a board meeting to propose and approve the conversion. A board resolution authorizing the conversion must be passed.
Consent of Shareholders: Shareholders must provide their consent to the conversion through a special resolution passed at a general meeting.
Application to ROC: Prepare and file Form 18 with the
Registrar of Companies (ROC) within 30 days of passing the special resolution.
Along with Form 18, submit necessary documents such as the LLP agreement,
statement of assets and liabilities, and other relevant forms.
Publication of Notice: Publish a notice in a widely circulated newspaper in English and a regional language where the registered office of the company is situated, informing the public about the conversion. This is to invite objections, if any, from stakeholders.
No Objection from Creditors: Obtain a No Objection Certificate (NOC) from creditors, ensuring they have no objection to the conversion.
Issuance of Certificate: If the Registrar is satisfied with the application and there are no objections, a Certificate of Registration will be issued, officially recognizing the conversion of the company into an LLP.
Post-Conversion Formalities: After obtaining the Certificate of Registration, make necessary changes to business stationery, bank accounts, registrations, licenses, and other legal documents to reflect the new LLP structure.
1. Obtain Director Identification Number (DIN)
The minimum number of designated partners for the
incorporation of an LLP is two. One of them must be an Indian resident.
Currently, DIN is allotted with company incorporation or adding a director or
designated partner in a company/ LLP. Hence, first, such members need to be
added as directors in the company to obtain DIN. DIN will be required for those
who would become designated partners. Further, it is essential to apply for a
DSC before applying for the DIN. A Body Corporate can also be a partner in a
Limited Liability Partnership through a nominee.
2. Meeting of Board of Directors of Company
Call a meeting of the Board of Directors.
Pass requisite Resolution for Conversion of Company into LLP.
Pass requisite Resolution to authorize any director to file all the necessary forms with MCA.
Requisite resolution to authorize any director to file all
the necessary forms with MCA.
3. Application for Name Availability
The company will have to apply for reservation of name of
LLP And GET NAME APPROVAL CERTIFICATE FROM ROC.
4. Filing of Incorporation Form with Required Documents
File E Form FiLLiP with ROC along with following Attachments:
Address proof of the registered office of LLP.
The subscription sheets.
Consent to act as a designated partners and partners
Identity and Resident proofs of designated partners and partners
Detail of LLP(s) and/ or company(s) in which partner/
designated partner is a director/ designated partner.
5. Filing of Application for Conversion into LLP
Form 18 is the form for conversion of a company into an LLP. But it needs to be filed with Form for incorporation itself.
This form has information about the conversion of the company into LLP such as:
Whether all the shareholders of the company have given their consent for the conversion of a company into the LLP.
If all the partners of the LLP comprise all the shareholders of the company and no one else.
An up to date Income-tax return is file as per Income tax act, 1961.
Documents including the latest balance sheet and annual returns under the Companies Act, 2013 filed with MCA.
Validating if any conviction, ruling, order, a judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting as on date?
Getting to know regarding any security interest in the assets of the company is subsisting or still in force.
Whether any earlier application for conversion of the said company into limited liability partnership was refused by the Registrar.
If there is a presence of any secured creditors.
File E-FORM- 18 with ROC along with following ATTACHMENTS:
Statement of the consent of shareholders (Mandatory)
Statement of accounts of the company certified as true and correct by the independent auditor
List of all the secured creditors along with their consent
Copy of acknowledgement of latest income tax return
(Mandatory)
6. Certificate of Incorporation as LLP from ROC
After complying to all the formalities by the company and
approved by the Ministry, ROC to issues a COI as to the conversion of LLP.
7. Drafting of Limited Liability Partnership Agreement
Contents of Agreement are:
Name of LLP
Name of Partners & Designated Partners
Form of contribution
Profit Sharing ratio
Rights & Duties of Partners
Proposed Business
Rules for governing an LLP
8. Filing of E-Form-3
This form provides information about the LLP Agreement entered into between the partners. This form is to be filed in 30 days from the date of conversion of the company into an LLP.
Attachment Required: LLP Agreement
9. Filing of E-Form -14 (Intimation to ROC)
After receiving incorporation certificate of LLP it has to be filed within 15 days of the date of conversion.
ATTACHMENTS OF E-FORM 14
Copy of Certificate of Incorporation (COI) of LLP.
Copy of incorporation document submitted in E-Form FiLLiP to ROC.While the conversion process offers various benefits, businesses must carefully consider certain factors before proceeding:
Tax Implications: Evaluate the tax implications of the conversion, including capital gains tax, stamp duty, and ongoing tax liabilities under the new structure.
Legal and Regulatory Compliance: Ensure compliance with all legal and regulatory requirements throughout the conversion process to avoid penalties or delays.
Business Continuity: Assess the impact of the conversion on business operations, contracts, agreements, and relationships with stakeholders.
Professional Assistance: Seek guidance from legal and financial experts specializing in corporate law and taxation to navigate the conversion process effectively.
Converting a Private Limited Company to an LLP can be a strategic decision for businesses in Bangalore seeking greater operational flexibility, reduced compliance burden, and tax efficiency. By understanding the conversion process, adhering to regulatory requirements, and considering key factors, companies can seamlessly transition to the LLP structure and position themselves for sustainable growth in the dynamic business ecosystem of Bangalore.
Created & Posted by Twinkle
MCA Expert at TAXAJ
TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ
Watch all the Informational Videos here: YouTube Channel
TAXAJ Corporate Services LLP
Address: 186/A, 1st Floor, 22nd Cross, 3rd Sector, Near HSR Club, HSR Layout, Bangalore- 560102
Contact: 8961228919 ; 8802812345 | E-Mail: connect@taxaj.com