Conversion Of Business Into Company

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Nowadays, many partnership firms are converting themselves into Limited Liability Partnership, because it provides some amazing benefits like  limited liability protection, no maximum limits for the number of partners, easy to transfer ownership, etc.

Typically the Partners in a Partnership Firm do not have a digital signature because it isnt necessary for the registration of a partnership firm. However, if the partners decide to convert the Partnership Firm into an LLP, then the  Digital Signature Certificate (DSC) is a mandatory requirement for all the Partners.

The Partners in an LLP or the  Directors in a Private Limited Company require a DIN / DPIN. A DIN is a unique number which is given to each partner or a director of an LLP. Once, a DIN/DPIN is issued, it can be used without any renewal or any compliance filing for the lifetime.

Once, two DIN/DPIN are available, an application for name reservation of the prospective company can be made to the Ministry of Corporate Affair. The Reservation of the name of the LLP must be obtained before filing the forms for conversion of the Partnership Firm into LLP.

Application and a  Statement of the Conversion of Partnership Firm into LLP (Limited Liability Partnership) i.e., Form 17  should be filed along with the incorporation application. The subscribers sheet should also be filed while converting a partnership firm into an LLP. After filling the form 17 the mentioned documents should be mandatorily attached with it:

1. A Statement of consent of partners of the firm.
2. A Statement of the assets and liabilities of the firm which is duly certified as a  true copy by a practicing Chartered Accountant.
3. A Copy of the acknowledgment of the latest income tax return (Mandatory).
4. Approval from any regulatory body/ authority (Mandatory).
5. Prepare a list of all the secured creditors along with their consent to the conversion. It is Mandatory in case the consent of all the secured creditors for the conversion of the firm into a limited liability partnership has been.
6. A Clearance or No Objection Certificate (NOC) from the Tax Authorities.

Once, an LLP Form 17 is filled it must be digitally signed by a Designated Partner from a professionally practicing Chartered Accountant/Cost Accountant/Company Secretary.

For the Conversion of a Partnership Firm into LLP, LLP Form 2 and LLP Form 3 must also be filed. LLP Form 2 contains theincorporation document and the subscriber statement along with the following attached documents:

1. Proof of address of the registered office of the LLP.
2. The Subscribers sheet with consent.
3. In principle an approval of the regulatory authority, if required.
4. The Details of LLP(s) and/ or company(s) in which the partner/ designated partner is a director/ partner (if any).

The LLP Form 3 contains the initial Limited Liability Partnership Agreement. This form can be filed once the Partnership Firm is converted into an LLP or while filing for the conversion of the Partnership Firm into LLP. The LLP Agreement must be attached with the  LLP Form 3.

On successful conversion of Partnership firm into LLP, the Registrar would then issue a Certificate of Incorporation of LLP and all the properties, assets, interests, rights, privileges, etc. of the firm are now transferred to the LLP.

However, any approvals/permit/license that is issued under any law to the Partnership Firm will not be automatically transferred to the Limited Liability Partnership. Therefore, fresh licenses or any registrations may be required. This aspect of conversion of a Partnership into LLP must be well considered before the conversion process.