After introduction of LLP Act in 2008, many Partnership Firms have started to convert their Partnership Firm to LLP. The reasons of conversion are self-evident such as ability to take unlimited number of partners, separate legal entity, limited liability and ease of ownership transfer. Because of these advantages of LLP over Partnership, LLP has become very popular amongst small and medium sized businesses.
The Partnership Firm which wants to convert itself to LLP must be registered under Indian Partnership Act, 1932. Unregistered Partnership Firm can’t be converted to LLP. LLP incorporated by conversion of Partnership Firm to LLP must have same partners as they were in the Partnership Firm.
Therefore it is suggested that the Partnership Firm should retire all the Partners who do not wish to be a part of LLP and if new partners are to be added, they should be added after the incorporation of LLP.
ADVANTAGES OF LLP
- Low set-up cost
- Minimal Compliances
- Tax Advantages
- Limited Liability
- Separate Legal Entity
MINIMUM REQUIREMENTS FOR CONVERSION TO LLP
- Up to date filing of Income tax returns.
- The partners shall receive consideration only by way of allotment of shares in LLP.
- Consent of all the unsecured creditors for the proposed conversion in LLP.
- Minimum 2 Partners.
- At least 1 of the designated partners shall be an Indian Resident.
- DPIN for all the Partners.
- DSC for all the Partners.
- There has to be some sort of contribution from each partner.