LLP is a body corporate which has been governed by the LLP act, 2008, where partners will have limited liability as per their contribution in the form of partnership. The company incorporation process in India can be done via online mode by visiting the MCA (ministry of corporate affairs) online portal with required documents and attachments. Choosing the right business structure from the plethora of options is a tedious task.
But LLP is one of the favoured structures among the entrepreneurs in India as it serves many benefits. Businesses chose to register LLP in India for its relatively easy and straightforward process. As it is governed by the ministry of corporate affairs and incorporated under the companies act, 2013. One can initiate the procedure via an online portal. LLP is a kind of hybrid model between company and partnership. In juxtaposition to other normal partnership firms, it has some edge over it but LLP lacks some advantages in comparison to a private limited company. Section 366 of the companies act, 2013 enables conversion to LLP into a private limited company by registering LLP under chapter XXI of the act.
As per section 366, any partnership firm, co-operative society, LLP, society, or any other business entity forged under any other law for a certain period, containing 2 or more members, may at any time register under the act as an unlimited company, or as a company limited by shares or by guarantee, as mentioned in the act. A company with less than seven members has to register as a private limited company.
Advantages in a private limited company that may require conversion of LLP;
– Enhance business by infusing equity capital, which is not possible under the LLP.
– Lesser tax rate in comparison to flat-rate tax under the LLP.
– Better accessibility of funds from the bank and FDI (foreign direct investment).
– Provides ESOPs to employees, which is not possible under the LLP.
– Persisting established brand value with a different corporate structure.
– Better entity’s corporate structure.
The process to convert the LLP into a private limited company.
– Organizing a meeting with partners and deciding matter with the majority, whether LLP must be registered under section 366 of the companies act, 2013.
– In that meeting, selecting a few partners to perform all the required procedures.
– Applying for the name. the same name can be used, as it was earlier for the LLP to register a private limited company (depending on the availability of the name). The company’s name should contain words as ‘private limited’.
– Publish the same in the newspaper.
– Submit the form URC-1 along with the mentioned documents.
Following attachments are compulsorily needed in the form URC-1;
– details of the partners such as names, addresses, occupations, etc. along with deets of shares owned by them, showing separately shares allotment for consideration in cash and for consideration other than cash with the source of consideration.
– Declaration of the two or more directors substantiating the details of all partners- details of the person proposed as first directors of the company, their names, passport number (if any) with an expiry date, DIN, residential address, and their interests in other bodies corporate or firms along with their assent to perform duty as a directors of the company.
– All the partners’ affidavit for dissolution of the LLP.
– LLP agreement’s copy.
– Newspaper advertisement’s copy.
– Certificate from CS/CA/CWA of compliance validation with all the provisions of the stamp act to the extent applicable.
– To meet required compliance with Indian stamp act, 1899, submission of undertaking by proposed directors.
– Latest ITR’s copy of the LLP.
– Certificate of incorporation of LLP’s copy.
– For the agreeing for such registration, written assent from the majority of the members whether present in-person or by proxy at a general meeting.
– NOC from concerned Registrar of firms or registrar of companies (LLP).
– NOC or written assent from all the secured creditors of the LLP.
– LLP’s statement of accounts, prepped not later than 15 days preceding the application date duly verified by the auditor, if and only applicable.
One can also attach any other documents if they consider them as required or officials ask them to do so.
– In form URC-1, the following major deets are needed to be provided regarding the LLP to be converted into a company;
– Service request no. (SRN) reserve unique name (RUN). Click on pre-fill. The name of the proposed company has to be pre-filled in the form.
– Type of company, on entering SRN, it must be pre-filled.
– Type of existing entity.
– Limited liability partnership number (LLPIN) – on entering SRN, it must be pre-filled.
– Existing LLP’s name, address, and Email ID – on entering LLPIN, these deets have to be pre-filled.
– Choosing the category of the proposed company incorporation in India – limited by shares (for conversion to a private limited company).
– Date of an instrument comprising the existing entity and description of the instrument (LLP agreement in this case).
– Date of general meeting ordering the resolution consenting to registration.
– Details of ordering special resolution and place of the general meeting.
– Entire amount of property.
– Directors’ declaration regarding completeness, truthfulness, and correctness of the given information in the form.
– After obtaining sanction for form URC-1 from the registrar of the companies, formulate memorandum of association (MOA) and articles of association (AOA) and submit it with ROC.
Note:
Information provided in the form URC-1 is to be verified by any of the following via DSC;
– CA in whole-time practice, or
– In whole time practice by Cost accountant, or
– CS in whole-time practice.
Pointers to keep in mind for professional experts involved in the conversion of the LLP into a private limited company;
– Get the engagement letter for the purpose of certification.
– Substantiate original attachments and records.
– Keep a check on business operations at the principal place of the business, via personal visits.
– Confirming that attachments are complete and legible.