How to convert a partnership firm into an LLP?

How to convert a partnership firm into an LLP?

Converting a partnership firm into a Limited Liability Partnership (LLP) in India is a structured legal process governed by the LLP Act, 2008. Below is a step-by-step guide to help you through the conversion:

Eligibility Criteria

  • All partners of the existing firm must become partners in the LLP.

  • The firm should be registered under the Indian Partnership Act, 1932.

🔁 Step-by-Step Process to Convert Partnership to LLP

Step 1: Obtain DSC and DIN

  • Digital Signature Certificate (DSC): For designated partners.

  • Director Identification Number (DIN): For at least two designated partners (can be obtained with the LLP incorporation form).

Step 2: Name Approval

  • File RUN-LLP (Reserve Unique Name) on the MCA portal to reserve the name of the LLP.

  • You can apply with the same name as the partnership firm if it's available.

Step 3: File Incorporation Application

  • File FiLLiP (Form for incorporation of LLP) with:

    • Details of partners and business.

    • Address proof.

    • Identity proof of partners.

    • Consent of partners (Form 9).

    • Subscriber’s sheet.

Step 4: File Form 17 (Application for Conversion)

  • This is specifically for conversion of a firm into LLP.

  • Attach:

    • Statement of partners.

    • Statement of assets & liabilities (certified by a Chartered Accountant).

    • List of all secured creditors (with their consent).

    • Copy of latest income tax return acknowledgment.

    • Consent of all partners for conversion.

Step 5: File LLP Agreement

  • File Form 3 within 30 days of incorporation to register the LLP Agreement.

  • The agreement must detail the rights, duties, and obligations of partners.

Step 6: Certificate of Registration

  • On approval, the Registrar issues a Certificate of Incorporation for the LLP.

  • The partnership firm is considered dissolved from this point.

📄 Post-Conversion Compliance

  • Update PAN and other registrations (GST, bank accounts, etc.) to reflect the LLP structure.

  • Intimate concerned authorities (like the Income Tax Department) about the conversion.

  • Transfer all assets and liabilities to the LLP.

💡 Points to Note

  • No capital gains tax liability arises on such conversion under Section 47(xiiib) of the Income Tax Act if certain conditions are met.

  • The LLP must have the same partners as the original firm.

  • No partner should receive any consideration or benefit other than shares in profit and capital contribution in LLP.

Created & Posted by Ravi Kumar
CA-Article at TAXAJ

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