Partnership firms are increasingly opting for a makeover, transforming into the simpler and more enticing Limited Liability Partnership. Reasons for this are because LLP brings a range of merits, from having an unlimited number of partners to enjoying the perks of limited liability protection, transferability, and survivability. In this blog, we’ll see the conversion process of partnership to LLP with the use of LLP form 17.
Steps for Conversion of Partnership to LLP
Converting a Partnership registration to LLP registration involves a series of essential steps to ensure a smooth transition. Mentioned here are the key actions to be taken:
1.Digital Signature Acquisition:
In a typical Partnership Firm, obtaining a digital signature is not a prerequisite for registration. However, when opting for the conversion to a Limited Liability Partnership, it becomes imperative for all Partners to possess digital signatures. This requirement underscores the significance of digital authentication in the LLP setup.
2.DIN or DPIN Procurement:
LLP Partners or Directors in a Private Limited Company must acquire a Director Identification Number or Designated Partner Identification Number. The DIN is a distinctive identifier assigned to each LLP Partner or Director. Once obtained, this number remains valid throughout the individual’s lifetime, exempt from renewal or compliance filings.
3.Name Approval Application:
After securing two DIN or DPIN numbers, the next step involves applying for the reservation of the LLP’s name with the Ministry of Corporate Affairs. It is crucial to obtain approval for the chosen name before initiating the filing process for the conversion of the Partnership Firm to LLP.
Filing LLP Form 17 – Conversion of Partnership into LLP
When converting a Partnership Firm into a Limited Liability Partnership, the process involves filing LLP Form 17, which is the Application and Statement for Conversion. The following steps outline the necessary procedures and documents required:
1.Preparation of LLP Form 17:
Begin by filing LLP Form 17, incorporating the application and subscriber’s sheet. This form serves as the official application for the conversion of the Partnership Firm into an LLP.
2.Attachment of Documents:
Along with LLP Form 17, ensure the attachment of the following documents:
· Statement of Partner Consent:
Include a statement confirming the consent of all partners involved in the conversion.
· Statement of Assets and Liabilities:
Provide a statement detailing the firm’s assets and liabilities, duly certified as accurate by a practicing Chartered Accountant.
· Copy of Latest Income Tax Return:
Attach a copy of the acknowledgment of the most recent income tax return, which is mandatory for the conversion process.
· Regulatory Approvals:
If applicable, include approvals obtained from any relevant regulatory body or authority. This step is mandatory when such approvals are required for the conversion.
· List of Secured Creditors:
Include a list of all secured creditors, along with their consent for the conversion. This is mandatory if consent from all secured creditors has been obtained for the LLP conversion.
· Clearance or No Objection Certificate from Tax Authorities:
Obtain and attach a clearance or a No Objection Certificate from the tax authorities.
3.Digital Signatures and Signatories:
Sign LLP Form 17 digitally, and ensure that it is signed by a Designated Partner. Additionally, the form must be co-signed by a practicing Chartered Accountant, Cost Accountant, or Company Secretary, all of whom must be in whole-time practice.
By adhering to these steps and submitting the necessary documentation, the conversion process from a Partnership Firm to an LLP can be effectively completed.
Filing for Incorporation & Conversion of Partnership into LLP
To initiate the incorporation and conversion process of a Partnership Firm into a Limited Liability Partnership, the filing of LLP Form 17, LLP Form 2, and LLP Form 3 is necessary. Mentioned below are the key steps and documents involved:
1.LLP Form 17:
Purpose: Application and Statement for the Conversion of Partnership Firm into LLP.
Submission: File LLP Form 17 along with the incorporation application and subscribers’ sheet.
2.LLP Form 2:
Contains incorporation documents and the subscriber’s statement.
Submission: File LLP Form 2 along with the following documents:
· Proof of address of the registered office of the LLP.
· Subscribers’ sheet, inclusive of consent.
· In-principle approval from the regulatory authority, if required.
· Details of LLP(s) and/or company(s) in which the partner/designated partner holds a directorship or partnership, if applicable.
3.Additional Submission Details:
· Registered Office Proof:
Include proof of the registered office address of the LLP.
· Subscribers’ Sheet:
Attach the subscribers’ sheet, ensuring it includes their consent for the conversion.
· Regulatory Authority Approval:
If necessary, provide the in-principle approval from the regulatory authority.
· Details of Other LLPs/Companies:
Furnish information on any LLP(s) and/or company(s) where the partner/designated partner holds a directorship or partnership.
4.Submission Timing:
File LLP Form 2 either after the conversion of the Partnership Firm into LLP or concurrently while filing for the conversion.
5.LLP Form 3 and LLP Agreement:
Purpose: This form is attached to the LLP Agreement.
Submission: File LLP Form 3 along with the LLP Agreement.
6.LLP Agreement Attachment:
Attach LLP Form 3 to the LLP Agreement, which is a crucial document outlining the rights, duties, and responsibilities of the LLP partners.
By adhering to these steps and providing the necessary documents, the incorporation and conversion of a Partnership Firm into an LLP can be completed effectively.
Effective Conversion of Partnership into LLP
Upon the successful conversion of a Partnership Firm into a Limited Liability Partnership, several significant changes and legal implications come into play:
1.Issuance of Certificate of Incorporation:
The Registrar issues a Certificate of Incorporation of the LLP upon the successful completion of the conversion process.
2.Dissolution of Partnership Firm:
The converted LLP signals the automatic dissolution of the original Partnership Firm.
3.Transfer of Assets and Liabilities:
All properties, assets, interests, rights, privileges, liabilities, and obligations of the Partnership Firm are seamlessly transferred to the newly incorporated LLP. This includes the entire undertaking of the firm.
4.Exception for Approvals, Permits, and Licences:
While most aspects of the firm are transferred, it’s crucial to note that approvals, permits, or licences issued under any written law to the Partnership Firm are not automatically transferred to the LLP.
5.Need for Fresh Licences or Registrations:
Any existing approvals, permits, or licences obtained by the Partnership Firm may not carry over to the LLP. As a result, the LLP may need to secure fresh licences or registrations to ensure compliance with legal requirements.
6.Consideration Before Conversion:
Before initiating the conversion process, careful consideration should be given to the regulatory landscape. Assessing the implications on licences and permits and taking proactive measures to address these matters ensures a smoother transition.
So, while the successful conversion of a Partnership Firm into an LLP brings about numerous advantages, including limited liability for partners, it is crucial to be mindful of the legal intricacies and ensure that all necessary approvals and licences are appropriately addressed post-conversion. This diligence helps in maintaining regulatory compliance and facilitating the seamless operation of the newly formed LLP.
Final Thoughts
The conversion of a Partnership Firm to a Limited Liability Partnership through LLP Form 17 involves a careful process. By filing this form, along with requisite documents such as partner consent, financial statements, and regulatory approvals, the transformation is initiated. Following successful conversion, the Registrar issues a Certificate of Incorporation for the LLP. This signifies the dissolution of the Partnership Firm, with all assets and liabilities seamlessly transferred to the LLP. However, it’s crucial to note that approvals, permits, or licences do not automatically transfer, necessitating a careful post-conversion review and potential acquisition of fresh licences to ensure compliance with legal requirements.
