How to Convert your Business from a Private Limited to an LLP in India?

Are you a business owner looking to expand your horizons? Operating a business comes with its challenges, right from setting up the company until executing services at every stage. This article will guide you on how to convert your Private Limited company into a Limited Liability Partnership or LLP in India. It is essential to understand the different business structures and henceforth proceed with their own criteria.

India is booming with startups every second month as this culture has been embedded in the upcoming generation. Every professional has a storehouse of ideas that can be utilised for the better good of the community. In this article, we will discuss the critical sections of incorporation required for a successful conversion of business structures, in addition to the advantages of a Private Company and an LLP.

Difference between a Private Limited and a Limited Liability Partnership

If you are willing to start your venture in India, a Private Limited will be the ideal choice. It is primarily a company owned by an individual or a small group of people who are otherwise known as ‘shareholders’. A startup or a business with prospects of expanding globally would benefit from this business structure.

A Limited Liability Partnership or LLP, on the other hand, is a culmination of a partnership between two business professionals and also includes the features of a private company, both knit into one. One of the business partners needs to be a resident of India for this business structure to work out. This is suitable for businesses that have clients abroad. Many companies nowadays are shifting from the standalone Private Limited structure to a Limited Liability Partnership. It enables individual liability and the security of a minimum of two partners against one to run the company. It is an ideal structure to attract foreign investment as well.

What are the Documents required to Convert your Company into an LLP?

There is a list of documents that have to be produced while registering for the conversion fo your company’s business structure in India. The documents are as follows:

1. A form or statement declaring the consent of all shareholders of the company for the conversion of the business structure
2. Articles of Incorporation
3. An application form for the conversion of the business structure
4. A NOC or No Objection Certificate obtained from the respective tax authorities. Unless this is collected, you cannot go ahead with the conversion of your company
5. A statement issued enlisting the details of all the assets, count and liabilities of the company
6. If there are any creditors, all their credentials need to be enclosed during the application
7. Approvals from any other country if needed.
8. Any additional documents if required.

Are all Private Limited Companies eligible to convert into an LLP?

In India, a Private Limited Company can only be converted into an LLP under the following circumstances:

1. If the partners of the company approve of turning into equal shareholders of the company
2. If the company does not have any interests levied on the assets at the time of the conversion application.

What is the Procedure for Converting a Company into an LLP in India?

The steps to convert your Private Limited enterprise into an LLP are as follows:

1. If you or your partner do not have a DIN issued, attain one to proceed further.
2. A thorough board meeting needs to be held for the Board Resolution to be approved. Once that is done, all directors can apply for an LLP.
3. A Name Approval Certificate needs to be obtained from the ROC. While choosing the name for the company, ensure that it aligns with the vision and mission of the enterprise. It should also be something unique and cannot replicate an existing company in the country or abroad.
4. Obtain an eForm and then attach with the ROC to go ahead with your application.
5. While obtaining the Form for Incorporation, get your hands on Form 18, which is mandatory for the conversion of the business structure.
6. Once all the formalities are over, the ROC will issue a COI to mark the change.
7. Once the conversion is done, E Form 3 needs to billed up within 30 days stating all the details necessary for the partners in the LLP.
8. An incorporation certificate will be issued at the end, declaring the successful conversion.

What is the Fee for Converting your Company into an LLP in India?

There is a standard fee applicable for converting your business structure into an LLP in India. The fee varies depending upon the contribution of all shareholders of the company. They are stated in the below-mentioned categories:

1. 500 for an LLP whose contribution goes up to Rs. 1,00,000.
2. 2000 for an LLP whose contribution ranges between Rs. 1,00,000 to Rs. 5,00,000.
3. 4000 for an LLP whose contribution ranges between Rs. 5,00,000 to Rs. 10,00,000.
4. 5000 for an LLP whose contribution exceeds Rs. 10,00,000.

With the abovementioned guidelines in mind, you can successfully convert your business structure from a Private Limited to an LLP without any hassles. It is always better to adopt strategies and business ideas that make your enterprise stay ahead in the game. It enables you to efficiently carry out the operations in the company and also to generate employee satisfaction and higher and revenue.