Conversion Of Partnership Firm Into Limited Liability Partnership Firm

In recent years, many entities have been registered under the LLP Act. This might be in the form of conversion or totally new registration. There are several reasons which are motivating the entities to make such decisions as the LLPs provide more flexibility and freedom with regard to management and also easily attract foreign investors to invest in the company as there is a perpetual succession for the company despite any partner leaving the company due to death or such other reason.

This article discusses the procedure and the documents or other necessary steps that should be complied with by the Partnership Firm when it wants to convert into an LLP.

Conditions for Converting a Partnership Firm to LLP

1. Partnership Firms should be registered under the Partnership Act of 1932.
2. The conversion shall have complied with section 55 of the LLP Act.
3. The partners of the Partnership Firm should be the partners of LLP and there should not be any addition or elimination of partners. Any such changes of partners can only be done after the completion of the conversion.
4. All the partners of the Partnership Firm should have a valid DSC (Digital Signature Certificate), and at least two partners should have DPIN (Designate Partner Identification Number) before such application for conversion is made.
5. All partners should provide their consent for such conversion before any procedure for the same has been taken.

Procedure for Conversion

The following steps should be followed by the firm to convert into LLP:

Step 1: Name Approval and DSC

The firm which wants to convert into an LLP should first Register on the MCA Portal and then log on to the same.
Once logged in, under the MCA Services tab, the option named ‘RUN-LLP’ should be selected, where RUN stands for Reserve Unique Name.

Now the option named, ‘Conversion of Firm into LLP’ should be chosen from the dropdown list. And here you can give two proposed names for the LLP and along with this if there are any supporting documents pertaining to the same, shall also be uploaded in PDF format.

Once this is done and the ‘Submit’ button is clicked, the page will lead to the payment page, where a nominal government fee should be paid.

The validity of the name proposed shall stand valid for a period of 90 days.

DSC
It is mandatory that the designated partners hold valid DSCs in their name as every e-form pertaining to the conversion requires affixing of DSCs.

Step 2: Filing of the Forms with the ROC

Form 17 – Application and Statement for Conversion of Partnership Firm to LLP

The applicants should firstly fill the Service Request Number (SRN) of the RUN-LLP Form which was issued when filing the proposed names.

The name of the proposed LLP should be given along with the name, address, registration, and partnership agreement details of the partnership firm.

The details of all the partners of the Partnership Firm, along with the amount of capital contributed by each of them, should also be furnished here. The Partnership Firm should also provide the details of the Secured Creditors.
The attachments to be furnished with the form include the following:

1. Statement of Consent of the Partners,
2. Statement of Assets and Liabilities of the firm certified by Chartered Accountant (CA) in practice,
3. Latest Income Tax Return (ITR) Acknowledgments,
4. List of secured creditors of the firm, along with their consent regarding the same,
5. Other additional information is required (option).

Form FiLLiP – Incorporation of LLP

The details which should be furnished here are firstly the details of the RUN-LLP form (auto-fil), along with the registered office details of the LLP and the email ID of the LLP. Then the details of the office of the registrar, nature of the business activities, the details of partners, designated partners along with their DPINs, DINs, and PAN should also be provided. The capital contribution made by each of the partners should also be included.

There are certain attachments that should be made along with this form, and the same has been listed hereunder:

1. Proof of Address of the LLP office,
2. Consent of the subscribers,
3. NOC (No Objection Certificate) from the owner of the property along with utility bills which should not be older than 2 months.
4. Approval from any Regulatory Authority as required,
5. If the Designated Partner is a director or partner in such another LLP or Company, then the details of such entities should also be furnished,
6. If there is any resemblance of the name of LLP with such other existing Company or LLP, then an NOC from such entity should also be obtained and attached herewith,
7. Capital of Proposed LLP and contribution made by each partner,
8. Voter ID/Passport or such other details of the Proposed Partners,
9. PAN of all Designated Partners or other partners,
10. Bank Statement of the Designated Partners or other partners,
11. Propose the main object of the LLP.

Both the above-mentioned forms should now be e-signed by all the partners and certified by the Cost Accountant, Company Secretary, Chartered Accountant, or any of the persons specified and who are in Whole-Time Practice. The fees pertaining to these forms will change with respect to the total capital contribution.

Step 3: Issue of Registration Certificate

The registrar shall issue a Certificate of Registration of the Proposed LLP based on the application received and its approval.

Step 4: Filing of Form LLP-3

The LLP shall now file Form LLP-3 along with the LLP Agreement within 30 days from the date of incorporation. This shall contain the following details: the name of the LLP, the names of designated and other partners, their profit-sharing ratios, and the form of the capital contribution made. The rights and duties of the partners and the rules governing them shall also be provided.

Step 5: Intimation to the Registrar of Firms

The LLP shall now provide the Registrar of Firms an intimation regarding the conversion of the firm into an LLP within 15 days from the date of incorporation of the LLP in Form-14, which should be attached with the;
LLP Incorporation Certificate and Documents submitted along with Form FiLLiP.

Now, it is to be noted that once all these steps pertaining to the conversion of Partnership Firm to LLP are complied with, we can say that the conversion is said to be done with. But this does not bring into effect the transfer of the licenses and permits which were in the hands of the Partnership Firm and, hence, should now be freshly applied for in the name of the LLP.

In case of any refusal made by the registrar, the applicants can appeal before the Tribunal concerning the same.