How to convert an LLP into a Pvt. Ltd Company or Vice Versa?

Limited Liability Partnership (LLP) and Private Limited Company (Pvt. Ltd) are popular business structures in India. Many businesses consider converting from LLP to Pvt. Ltd. to support growth, attract investment, improve credibility, and enjoy flexible compliance. Choosing the right business structure at the right time is very important. It influences funding options, legal duties, and the company’s success over the long term. In this blog, you will learn about “How to convert an LLP into a Pvt. Ltd company or Vice Versa?”.

Key Differences Between LLP and Pvt. Ltd Company

Here is the list of key differences between LLP and Pvt. Ltd Company:

Documents Required to Convert an LLP into a Pvt. Ltd Company

Here is the list of documents required to convert an LLP into a Pvt. Ltd company:

1. Consent and Resolutions

• Consent from all partners for the conversion.
• Board and LLP resolutions approving the conversion.

2. Identity and Address Proofs

• PAN and Aadhaar cards of all partners/directors.
• Passport-sized photographs.
• Documentary evidence of the registered office address, such as a utility bill or rental agreement, is required
• Certificate of Incorporation of the LLP.
• LLP Agreement and any supplementary agreements.
• Latest financial statements and Income Tax Return (ITR) filings.

3. Declarations and Affidavits

• Affidavits from partners declaring the dissolution of the LLP.
• Declarations by proposed directors confirming compliance with the Companies Act, 2013.

4. No Objection Certificates (NOCs)

• NOC from all creditors.
• NOC from the Registrar of Companies (RoC) where the LLP is registered.

5. Public Notice

Advertisement of the conversion in one English and one vernacular newspaper in the district where the LLP is registered, as per Form URC-2 requirements.

6. Company Incorporation Documents

• Memorandum of Association (MoA) and Articles of Association (AoA).
• List of proposed directors and their consent in Form DIR-2.
• Application for name reservation using the RUN (Reserve Unique Name) form.
• Filing of Form URC-1 for conversion.
• Filing of SPICe+ forms for incorporation.

How to Convert an LLP into a Pvt. Ltd Company?

Converting a Limited Liability Partnership (LLP) to a Private Limited Company (Pvt. Ltd Company) in India is governed by the Companies Act, 2013, and the Limited Liability Partnership Act, 2008. Here is a step-by-step process to convert LLP  into a Pvt. Ltd company:

Step 1: Obtain Name Approval

You must submit the RUN (Reserve Unique Name) form on the MCA portal to reserve your preferred company name. Ensure that the name follows the naming rules set under the Companies Act, 2013 to avoid rejection.

Step 2: Obtain Digital Signature Certificates (DSCs)

Obtain Digital Signature Certificate (DSCs) for all individuals who will be directors of the company. These certificates are required to securely sign and submit the incorporation documents online.

Step 3: Apply for Director Identification Numbers (DINs)

If the proposed directors do not already have a Director Identification Number (DIN), it must be applied for through the SPICe+ form during company registration. DIN is compulsory for all directors as per the Companies Act, 2013.

Step 4: Draft Memorandum and Articles of Association (MoA & AoA)

Prepare the Memorandum of Association (MoA) and Articles of Association (AoA), which define the company’s goals and internal regulations. All subscribers must sign these documents in front of a witness before submission.

Step 5: File Incorporation Forms

To incorporate the company, you must file the required forms online through the MCA portal. These include SPICe+ (INC-32) for incorporation, e-MoA (INC-33) and e-AoA (INC-34) for company rules, and URC-1 for registration under Section 366 if applicable. You must also attach the other required documents as mentioned above in the document section.

Step 6: Obtain Certificate of Incorporation

Upon verifying all the submitted forms and documents, the Registrar of Companies (RoC) issues the Certificate of Incorporation. This certificate confirms the official formation of the Private Limited Company.

Step 7: Apply for PAN and TAN

You must apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) using the SPICe+ form for smooth tax compliance.

Step 8: Update Bank and Other Registrations

You must inform banks and relevant authorities about the change in the business structure. You also need to update all licenses, registrations, and official agreements to reflect the new status of the company as a Private Limited Company.

Documents Required to Convert a Pvt. Ltd Company into an LLP

Here is a list of documents required to convert a Pvt. Ltd Company into an LLP:

1. Consent and Resolutions

• Consent of all shareholders for the conversion.
• Board Resolution approving the conversion.

2. Financial and Tax Documents

• Statement of Assets and Liabilities certified by a Chartered Accountant.
• Acknowledged copy of the latest Income Tax Return.
• The latest financial statements and the auditor's report.

3. Creditor and Legal Approvals

• List of all secured creditors along with their consent for the conversion.
• Details of any pending legal proceedings or litigations.

4. Company Incorporation and Shareholding Details

• Certificate of Incorporation of the company.
• Memorandum and Articles of Association (MoA & AoA).
• List of shareholders and their consent.

5. Partner and Registered Office Details

• Details and consent of proposed partners/designated partners.
• Proof of registered office address (such as, utility bill, rent agreement, or NOC from the owner).

6. Regulatory Approvals (if applicable)

• Approvals from any regulatory authority, if required.
• Approval from the owner of a registered trademark, if the proposed LLP name includes such a trademark.

7. LLP Incorporation Documents

• Subscriber's sheet including consent.
• An LLP Agreement outlining the roles, responsibilities, and mutual obligations of the partners is necessary.

8. Additional Declarations

• Declaration by designated partners stating compliance with all requirements of the LLP Act.
• Statement that all shareholders of the company have become partners of the LLP.

How to Convert a Pvt. Ltd Company into an LLP?

Converting a Private Limited Company (Pvt. Ltd Company) into a Limited Liability Partnership (LLP) in India is governed by the provisions of the Limited Liability Partnership Act, 2008, and the Companies Act, 2013.

Here is a step-by-step process to convert a Pvt. Ltd Company into an LLP:

Step 1: Eligibility Check

Make sure the following requirements are fulfilled prior to starting the conversion process:

• Company Type: Only private limited companies and unlisted public companies are eligible for conversion.
• Shareholders and Partners: All shareholders of the company must become partners of the LLP, and no one else can be a partner during the conversion process.
• Pending Forms: There should be no pending e-forms for payment or processing.
• Financial Statements: At least one financial statement (Form AOC-4) and annual return (Form MGT-7/MGT-7A) must have been filed.
• Company Type Restrictions: The Company should not be a Section 8 company (i.e., a non-profit organization).
• Share Capital: The Company must have share capital.

Step 2: Board Meeting

You must hold a board meeting to formally approve the decision to convert the Private Limited Company into a Limited Liability Partnership (LLP). During the meeting, authorize one director to handle name reservation and submit all required forms for the conversion.

Step 3: Name Reservation

You need to file the RUN-LLP (Reserve Unique Name – LLP) form on the MCA portal to secure the preferred name for the LLP. You must also attach the board resolution that approves the chosen name for the reservation.

Step 4: Filing Incorporation Documents

To convert a private company into an LLP, you must submit the required incorporation forms on the MCA portal. Start by filing Form FiLLiP and selecting the option for conversion. Then, file Form 9 to obtain consent from designated partners and Form 18 as the official conversion application. You must also attach all supporting documents for approval.

Step 5: Certificate of Incorporation

Once all the forms and documents are verified, the Registrar of Companies (ROC) issues the Certificate of Incorporation for the Limited Liability Partnership (LLP).

Step 6: Filing LLP Agreement

After incorporation, partners must sign the LLP Agreement and submit Form 3 within 30 days. This agreement clearly outlines the rights and responsibilities shared among the partners.

Step 7: Intimation to ROC

You must file Form 14 to notify the Registrar of Companies (ROC) within 15 days of converting a company into an LLP. You must also attach a copy of the LLP’s Certificate of Incorporation and the incorporation documents submitted through Form FiLLiP along with this form.

Step 8: Post-Conversion Compliance

Post-Conversion compliance includes:

• PAN and TAN: Apply for a new PAN and TAN for the LLP.
• Bank Accounts: Open a new bank account in the name of the LLP.
• Intimate Authorities: Inform all concerned authorities, vendors, and clients about the conversion.
• Update Registrations: Update registrations under various statutes like GST, Shops and Establishment Act, etc., to reflect the new LLP status.

Conclusion

Converting your business structure, whether from an LLP to a Pvt. Ltd Company or vice versa is a significant decision that impacts taxation, compliance, and operational dynamics. Both structures have unique benefits. Private Limited Companies are ideal for raising funds and offering shares to employees, while LLPs are simpler to manage with fewer legal formalities. It is crucial to assess your business goals, growth plans, and regulatory comfort before choosing the right structure. If you have any queries about the conversion, contact Online Legal India to get assistance.