Partnership to LLP Registration is an important step for businesses as Limited Liability Partnerships offer an advantage over ordinary partnership structures and are far more beneficial to the partners involved. Unlike a partnership, an LLP is a separate legal body that must be registered with the government.
An LLP is a business structure that combines the benefits of the corporate form of a company with the flexibility of a partnership, i.e., for organising their internal composition and operation as a partnership. As a result, Partnership to LLP registration is a wise business option that protects the partners' rights while limiting their responsibilities.
What are the Benefits of Partnership to LLP Registration?
Partnership to LLP Registration offers several advantages, benefiting the involved parties. Some of these advantages are:
Separate Legal Entity
One of the prominent benefits of partnership to LLP registration lies in its distinct legal entity status separate from its partners. Additionally, the LLP's existence is continuous and follows the principle of perpetual succession. Even if partners depart, the business remains unaffected. Dissolution of the LLP requires a consensus among its members.
The flexibility of transferring ownership within an LLP is a noteworthy advantage. The process of inducting a new designated partner is streamlined, leading to a seamless transition of ownership.
Suitable for Small Businesses
Partnership to LLP registration proves to be especially advantageous for small businesses, owing to specific criteria. LLPs with a capital of less than 25 lakhs and an annual turnover under 40 lakhsare exempt from formal audits. This exemption simplifies the registration process for small businesses and startups. Additionally, an LLP possesses the ability to own or acquire property in its own name, establishing its identity as a juristic person. This property cannot be claimed by individual partners.
Absence of Owner/Manager Distinction
Unlike private limited companies where directors may differ from shareholders, LLPs are managed and owned by partners directly.
Limited Liability Protection
As the name suggests, partnership to LLP registration provides limited liability protection to their partners. This means that the personal assets of partners are not at risk to cover the debts and liabilities of the LLP. Partners are generally only liable for their own actions and decisions within the business.
Partnership to LLP registration offers favourable taxation structures. The income of the LLP is not taxed at the entity level but is passed on to the partners, who are responsible for paying taxes on their individual shares of the income.
For businesses that involve professional services like legal or accounting firms, partnership to LLP registration lends credibility. Clients often perceive LLPs as more trustworthy and reliable due to the formal structure and limited liability protection.
Ease of Compliance
Compliance requirements for LLPs are generally less burdensome compared to those of corporations. There are fewer regulatory formalities, making it easier for partners to manage and operate the business without being overly encumbered by administrative tasks.
Further, partnership to LLP registration allows for smoother succession planning. Changes in partners or ownership do not disrupt the continuity of the business. This can be particularly beneficial in family-owned businesses or situations where partners wish to retire or exit the business.
What are the Eligibility Criteria for Partnership to LLP Registration?
The process of converting a partnership to LLP registration involves several eligibility criteria that ensure a smooth transition and utilise the advantages offered by the LLP structure. This transformation primarily aims to ease the pressure on personal assets, which is less in comparison to a traditional partnership firm. LLPs, being a hybrid of partnerships and private limited companies, bring forth several benefits that make this conversion attractive, particularly for small and medium-sized businesses.
To ensure a seamless conversion process, certain eligibility criteria are required, which include:
- Inclusion of Existing Partners: All partners of the existing partnership firm must be incorporated as partners of the LLP. This ensures the continuity of ownership and management in the newly formed LLP.
- Exclusive Partner Inclusion: The LLP is limited to including only the partners from the original partnership firm. No external entities or individuals are permitted to be part of the LLP structure.
- Digital Signature Certificate Requirement: Each partner involved in the conversion process of partnership to LLP registration must possess a valid Digital Signature Certificate. Furthermore, a minimum of two partners must have a Designated Partner Identification Number before initiating the conversion application.
- Partnership Act Compliance: All the partners participating in the conversion process must have their registrations under the Indian Partnership Act, 1932. This ensures that the partners' legal status is recognised and compliant with the relevant legislation.
- Unanimous Consent of Partners: Prior to the conversion, the consent of every partner in the existing partnership firm is significant. This consensus signifies the partners' agreement to transition from partnership to LLP registration.
- Changes in Partner Composition: Any desired changes in the composition of partners, such as adding or removing partners, can only occur after the successful conversion of the partnership to LLP registration. This ensures clarity and consistency in the transformation process.
- Designated Partner Identification Number (DPIN): All Designated Partners involved in the LLP must possess a valid Director Partner Identification Number or DPIN. This unique identification facilitates efficient management and governance within the LLP structure.
Documents Required for Partnership to LLP Registration
When planning to convert a partnership to LLP registration, there are several significant documents that must be collected and submitted. These documents are categorised into two sections: those to be submitted by the partners and those pertaining to the registered office and are mentioned below:
Documents to Be Submitted by Partners
To facilitate the conversion process from partnership to LLP registration, partners need to provide specific documents that verify their identity and residence. These documents include:
- Scanned Copy of PAN Card or Passport (for Foreign Nationals & NRIs): Partners must submit a scanned copy of their PAN card. In the case of foreign nationals and NRIs, a passport copy is required to establish identity.
- Scanned Copy of Identity Proof: Partners need to provide a scanned copy of their Aadhar card, Voter's ID, passport or driver's licence as proof of identity.
- Scanned Copy of Address Proof: A scanned copy of a recent bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as proof of address.
- Scanned Passport-Sized Photograph: Partners must provide a passport-sized photograph for documentation purposes.
- Specimen Signature: Partners are required to submit a blank document with their signature as a specimen for reference.
Note: The first three documents must be self-attested by at least one of the partners. In the case of foreign nationals and NRIs, these documents need to be notarised (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).
Documents for Registered Office
Apart from the partner-specific documents, certain documents related to the registered office of the LLP are also significant. These documents help establish the physical location of the LLP and its compliance with legal requirements. The required documents include:
- Scanned Copy of Address Proof for Registered Office: Similar to the partner's address proof, a scanned copy of a recent bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as proof of the registered office's address.
- Scanned Copy of Notarised Rental Agreement (in English): If the registered office is on rent, a notarised rental agreement in English should be provided to confirm the office's location.
- Scanned Copy of No-Objection Certificate (NOC) from Property Owner: In cases where the office space is rented, a NOC from the property owner is required to indicate their consent for using the premises as the registered office.
- Scanned Copy of Sale Deed/Property Deed (in English): If the registered office is owned by the LLP, a scanned copy of the sale deed or property deed in English needs to be submitted as proof of ownership.
What is the Procedure for Partnership to LLP Registration?
Given below is the process for Partnership to LLP Registration:
Step 1: Apply for DIN (Director Identification Number)
- If there are two designated partners, apply for DIN along with the Incorporation form (FiLLip).
- If there are more than two designated partners, obtain DPIN for all other designated partners.
Step 2: Name Approval and Digital Signature Certificate (DSC)
- Register on the MCA portal and select the ‘RUN-LLP’ option.
- Reserve a unique name for the LLP and apply for ‘Conversion of partnership firm to LLP.’
- Submit the required documents along with the necessary fee.
- Each partner must possess their own Digital Signature Certificate (DSC), which will be used in the relevant forms.
Step 3: Filing of Form for partnership to LLP registration with ROC
- File Form-17: Partners need to file a conversion application under Form-17 along with attachments, including the statement of consent from all partners, consent from unsecured creditors, statement of assets and liabilities of the company, Designated Partners declaration (Part B of Form 17) and the acknowledgment copy of the latest Income Tax Return filing.
- File Form FiLLiP: Attach documents such as proof of office address (rent agreement), NOC from the property owner, copy of utility bills, complete contact details of all partners with DSC & DIN and Form-9 (consent to act as designated partners).
Step 4: Issue of Certificate of Registration of LLP
- The Registrar reviews the submission under Section 58(1)of the LLP Act and, if satisfied with compliance, registers the documents and issues a certificate of registration.
- Rule 32 (1)of the LLP Rules stipulates the issuance of the registration certificate by the Registrar under his seal in Form-19upon conversion from partnership to LLP registration.
Step 5: Draft of LLP Agreement
The LLP agreement should include essential details, like:
- Name of the LLP
- Names of Partners & Designated Partners
- Rights & Duties of Partners
- Contribution details
- Proposed Business description
- Governing Rules for the LLP
- Profit Sharing ratio
Step 6: Filling of E-Form LLP-3
This form contains the LLP Agreement details as entered into by all partners.
Step 7: Inform the Registrar of Firm
Within 15 days of LLP registration, inform the respective Registrar of Firms under the Indian Partnership Act, 1932. Provide details regarding the partnership firm's conversion into an LLP using Form-14, along with these attachments:
- Copy of LLP's Incorporation Certificate
- Copy of Incorporation documents submitted in FiLLiP
What is the Effect of Conversion from Partnership to LLP Registration?
The process of converting a partnership into LLP registration carries several significant effects on the legal and operational aspects of the business. These effects redefine the entity's structure and responsibilities and include:
Disbanding of Partnership and Asset Transfer
Upon the successful registration of the LLP, the partnership company is considered disbanded. This transformation results in the transfer of assets and liabilities from the erstwhile partnership to the newly established LLP. This transfer ensures that the accumulated resources and obligations are smoothly carried forward, preserving the entity's continuity.
The conversion from a partnership to LLP registration empowers the partnership's operations to continue seamlessly. This uninterrupted continuation enables the business to maintain its ongoing activities, helping stability and reducing disruptions during the transition.
With the registration as an LLP, the partners of the erstwhile partnership company become the named partners of the LLP. Consequently, these partners are obligated to adhere to the provisions outlined in the LLP Act. This alignment with the legal framework of the LLP Act ensures that the business operates within the boundaries of its new entity type.
Separate Legal Entity and Perpetual Succession
A distinct characteristic of the LLP structure is its status as a separate legal entity. This endows the LLP with perpetual succession, meaning that its existence remains intact even if there are changes in its partner composition.
Legal Liabilities and Continuation of Actions
The legal actions that were previously ongoing against the partnership company extend to the LLP upon conversion from a partnership to LLP registration. This means that any pending legal proceedings continue to be relevant to the newly formed LLP. Whether the outcome is favourable or unfavourable to the partnership company, it remains applicable to the LLP.
Continuation of Agreements and Contracts
All existing agreements, contracts and arrangements involving the partnership company remain in full effect with the LLP. These contractual obligations are transferred to the LLP, ensuring that business relationships are upheld without disruption.
Assignment and Power Transfer
Any assignments or powers that were granted to the partnership company are deemed to have been transferred to the LLP. This continuation ensures that the operational framework remains intact and the authority and responsibilities of the partnership are preserved within the LLP.
Why Choose Startupfino for Partnership to LLP Registration?
Startupfino is a company that specialises in offering complete services for Partnership to LLP Registration.We can aid with everything from providing advice in the beginning phase to ensuring that you meet all the necessary requirements and also keeping your LLP in good legal standing.
Our services include the below mentioned:
- Expert consultation and guidance for partnership to LLP conversion in India.
- Simplified documentation preparation and submission for a hassle-free transition.
- Dedicated assistance in obtaining Director Identification Numbers (DIN) for designated partners.
- Name reservation and approval process management to ensure a unique LLP identity.