Overview of Conversion of Partnership into LLP

The concept of Limited Liability Partnership has enjoyed an upper hand over the traditional Partnership structure. An LLP is a separate legal entity and combines the benefit of a Private Company and Partnership Firm. It means that this business format provides flexibility in the internal control and operations of a firm, an area where a Partnership lacks. Therefore, the conversion of Partnership into LLP is considered to be a good business choice to secure the rights and liabilities of partners.

Concept of Partnership Firm

In India, a partnership firm is a business structure carried on by two or more individuals. It is based on the principal and agent relationship and is governed by the provisions of the Indian Partnership Act, 1932. A Partnership Deed is an agreement between the partners of the firm. It contains details like the nature of the firm, right and liabilities of partners and their profit-sharing ratios, to name a few. A partnership firm is not a separate legal entity. It means that the partners of this business format do not enjoy the feature of limited liability.

Concept of Limited Liability Partnership Firm

A Limited Liability Partnership (LLP) is an alternative business format which provides the benefit of limited liability to its partners. It also permits the partners to organize their internal business environment like a partnership firm.
An LLP agreement acts as the basis for a Limited Liability Partnership. It includes the information of assets and liabilities of a firm, along with the rights and duties of partners. An LLP is a separate legal entity, i.e. the partners of an LLP firm enjoys limited liability. Therefore, an LLP is known as a hybrid of a partnership firm and private company. However, the concept of an LLP is different from a Limited Liability Company.

Benefits of Converting Partnership into LLP

Freedom of Management
The partners of an LLP are given flexibility to carry out operations and day to day affairs.
Perpetual Succession
An LLP is not affected by the death or exit of the partners due to its Perpetual Succession.
Investment Attraction
Venture Capitalists and Foreign Investors consider LLPs as a beneficial Investment Opportunity. This is because an LLP has the features of corporate structure and organization flexibility.
Professional in LLP
Professionals of several disciplines can work together in an LLP.

In India, the criteria for the conversion of a partnership firm into an LLP can be summarised as: A Partnership Firm must be registered under the provisions of the Indian Partnership Act, 1932. A firm not registered under the Act must mention the name of the statute under which it is registered

Digital Signature Certificate
All the partners in a Partnership Firm need to obtain Digital Signature Certificate. It is required for filling up of several Forms.
DINs or DPINs
All the partners of a partnership firm need to get DIN or DPIN. DIN is a unique number granted by the Central Government. A DIN or DPIN is issued only once and has lifetime validity.
Name Approval
The partners need to apply for the Name reservation of the proposed LLP with the Ministry of Corporate Affairs. All the partners must obtain name approval before converting a partnership firm into LLP. They need to file Form- 17 (for conversion) and SRN for the Name Reservation (RUN) of LLP.
Filing of Form Fillip
Now, the partners need to submit forms for the Incorporation of LLP. If the partners do not have DIN, then they can apply for DIN (Maximum 2) in the Form- Fillip. The partners also need to attach the following documents with the form:

Name of the Proposed LLP; DSC (Digital Signature Certificate) of Designated Partners;
Capital of the Proposed LLP;
Contribution of the Proposed Designated Partners;
Phone No. and E-Mail address of Proposed Partners;
Voter Id Card/ Driving License/ Passport of Proposed Partners;
Latest Utility Bill of the Registered Office (Not older Than 2 Months);
Proof of Registered Office (Index-2/ Sale Deed/ Allotment Letter/ Rent Agreement/ Possession Letter/);
PAN details of Designated Partners;
Bank Statement of Designated Partners;
Subscriber Sheet as well as Consent;
Address Proof of Registered Office including the NOC (No-Objection Certificate) of the Owner;
Proposed Main Object;
Details of a Company or LLP if the Designated Partner is a Director or Partner of any other LLP or Company.

Filing of Form 3
The partners need to file Form 3 concerning the information contained in the Limited Liability Partnership Agreement. They also need to attach the original copy of the LLP agreement as well. The Particulars of an LLP Agreement are as follows:
Name of the LLP;
Name of the Designated Partners;
Total number of Partners;
Capital Contribution by each Partner;
Profit sharing ratios;
Rules governing the LLP;
Rights and Duties of each Partner.

₹ 4,999/ Original ₹ 9,999 (50.01% OFF)