There are many businesses in India that start their journey as a Limited Liability Partnership, but now are eager on converting themselves into a private limited company for better growth and success in business. The condition that is cited in Section 366 of the Companies Act, 2013 and Company (Authorised to Register)  states that an LLP can be converted into a Private Limited Company.

Before you step into the industry of a Private Limited Company, there are several conditions that you may need to satisfy for converting an LLP into a Private Limited Company, for example, it is essential for an LLP to have seven partners and consent from all partners is required. A promotion is broadcasted in both regional and nationwide newspapers. No Objection Certificate is acquired from the ROC where LLP is registered and then the incorporation process starts.

Choice of LLP vs Private Limited Company

LLP is majorly convenient for miniature businesses that have annual deals turnover of more than Rs 40 lakhs and a cash-on-hand contribution of fewer than Rs 25 lakhs. LLPs that fulfil these prerequisites do not have to move through an audit every year, on the other hand, it is essential for a private limited company to complete an audit of its financial statement per year. Though in some cases, LLP has an annual turnover of Rs 40 lakhs or a capital contribution of more than 25 lakhs, the need for adherence becomes almost identical for both the private limited company and LLP, pushing the owners of LLP to convert into a Private Limited Company.

Advantages of Conversion

Many advantages are proposed by the limited liability partnership, like the limited liability of partners, separate legal commodities, endless succession, lesser submission than other companies and many more.

There are several other benefits of the conversion of LLP to Pvt. ltd Company which are as follows

Conservation of Brand Value

Transformation of LLP into a Private Limited Company encourages business commodities to continue the brand name without making any additional efforts on brand advertisements.

Move Forward Of Unabsorbed Failure And Depreciation

After the conversion, no expense will be incurred on bookkeeping, as the failures and depreciation incurred in LLP will be moved ahead on the transformation of the commodity

Employee Stock Proprietorship Plan For Employees

Conversion of LLP to Private Limited Company

encourages companies to offer stock rights and ESOP schemes. Such strategies help firms to draw efficient workers, as it proposes incentive projects for them to work in the company.

Easy Fund Raising

If the company registration process is rigid, it helps the company format to be more reasonable among others. This directs to easy fundraising from outer authorities.

Distinct Legal Presence

Transformation of the company boosts the distinct right and control to pay concentration to their possible work. The Shareholders give responsibility to run and manage the company without relinquishing control in the form of voting.

Limited Liability Of Owners

Conversion restricts the liability of the owners only to the money subscribed and unpaid by them.

Procedure to convert the LLP to Pvt. Ltd Company

Endorsement of the name

The endorsement of the name has to be obtained from the registrar of companies by laying an application in the e-format. To lay for this step, you need to choose different items that are presented in the form INC-1 and once the name is obtained by the administration, it will be useful for 60 days.

Assuring digital signature certificate and director identification number

If any of the partners, who are the forthcoming directors of the company after the conversion, do not have the Digital Signature Certificate and Director Identification Number then it should be obtained for the forthcoming directors of the company and for obtaining the DIN, an application form must be introduced on the MCA portal. The Director identification number application is specified & enacted by the central government via the office of the regional director, the ministry of corporate affairs.

The form must be accompanied by self-attested address proof and uniqueness proof with one passport size colour photo of the applicant. All the needed records should be secured along with a practising price or a hired accountant or a practising company secretary.

Filing of document number URC-1

 After obtaining the approval of the name from ROC, the applicant must file & organise the form URC-1 affixed with the following documents:-

1. Checklist of the members with their attributes like their names, addresses, shares held by them in the company
2. List of the first directors of the company with their details like names, address, the directors' identification number, passport number with their expiry date
3. A testimony from every individual suggested as the first director or directors, that he is not prohibited to be a director beneath section-164 of the companies act, 2013 and all the needed documents filed with the registrar for the registration of the company must include information that is whole and correct to be best of his faith and understanding.
4. An index including the names & addresses of partners of the limited liability partnership and a replica of the limited liability partnership contract & certificate of registration appropriately verified by two selected partners of LLP must be retained.
5. A statement suggesting the following specifications
   • the authorised share capital of the company & the number of stakes into which it is separated
   • the number of shares removed & the payment paid for every share
   • the title of the firm, with the addition of the word “Limited” or “private limited”, is needed
6. Documented approval or No objection certificate is needed from all creditors of the partnership
7. Copy of newspaper promotion and the statement of accounts of the business which must not be 6 days previous to the date of the application and must be properly authorised by the auditor.

Preparing of Memorandum of Association and Articles of Association

Drafting the Memorandum of Association & also Articles of Association is needed and then it must be filed with the registrars of companies after getting the acceptance of the name and endorsement of form no. URC-1 – from the registrar. The modification process brings on specific tax advantages, yet, for utilising the same many extra prerequisites required to be met, like preserving the identical shareholding by the partners as was in the before limited liability partnership when the conversion takes place, for five years from modification the former partners of such type of the LLP who are currently shareholders in the newly formed firm cannot have shareholding less than 50 per cent.

There is another option available for the LLP which is to set a different private limited company and after that get the total business transmitted to the private company with the help of a written contract, and on this ground, the limitations mentioned above like the need for the lowest number of 7 partners, newspaper promotions, are not needed to be met. 

Conversion of Pvt. Ltd Company to LLP

Requirements

• Every member of the organisation must conform to the determination of conversion.
• All the members evolve as the partners of an LLP
• The current copy of the Income-tax return is to be attached with ROC.
• Not only the members, but all the creditors of the firm must also agree with the conversion.
• Beneath the Companies Act, no prosecution should have been started procedures to be obeyed
• No open aggrieved charges should be pending against the company.
• At least one credit sheet and annual recovery should have been filed by the firm after its incorporation.
• The company should be having a stake capital.
• The company should not be a Section 8 Corporation.

Procedure for Conversion of Pvt.Ltd to LLP

Meeting of Board of Directors of Company

• Summon a conference of the Board of Directors.
• Enact requisite Board Solution for Conversion of Company into LLP.
• A requisite solution is to permit any director to file all the required forms with MCA.

Application for Name Availability

The company will have to apply for reservation of name in form RUN-LLP of LLP and Get a Name Authorisation Certificate from ROC.

Filing of Incorporation Form with Required Documents

• File e-Form FiLLiP with ROC along with the following Extensions:
• Residence proof of the registered office of LLP 
• The subscription sheets.
• Approval to act as a selected partner or partners
• Individuality and Resident evidence of selected partners and partners
• Detail of LLP(s) and/ or private limited company(s) in which partner/ selected partner is a director/ appointed partner.

Filing of Application for Conversion into LLP

• Declaration of the approval of shareholders is compulsory
• Statement of accounts of the company affirmed as true and accurate by the independent auditor
• List of all the closed creditors along with their approval
• Copy of declaration of most delinquent income tax returns is compulsory

Certificate of Incorporation as LLP from ROC

After all the formalities are completed by the firm and once the Ministry endorses it, Registrars Of Companies publish a COI for the conversion of LLP.

Drafting of Limited Liability Partnership Contract

This form supplies information about the LLP Contract entered into between the partners. This document is to be filed in 30 days from the date of conversion of the company into an LLP.

Therefore, it can be concluded that the  conversion of Pvt. Ltd Company to LLP or vice versa is a long process. Online Legal India helps you in this process and gets you to convert your Pvt. Ltd to LLP or also to convert an LLP to a Pvt. Ltd company. Our experts are also there to help you out in every situation.