How to convert an LLP into a Private Limited Company:-
Several businesses started in India as Limited Liability Partnership (LLP), may now wish to convert into a private limited company for more growth in business or for infusing equity capital. An LLP can be converted into a Private limited company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorized to Register) Rules, 2014.
However, there are various requirements which need to be satisfied for converting an LLP into a Private Limited Company, the LLP should have complied with all the statutory compliance requirements. The conversion of LLP to a Private Limited Company has to be published in at least 2 newspapers. One in a vernacular language and one in English language. You also need to obtain a No Objection Certificate from the registrar.
Filing form no. URC – 1 is required for conversion
Advantages of Conversion
- Separation between Ownership and Management: In a Pvt Ltd company, a clear separation exists between ownership and management, ensuring that a team of professionals with diverse skills necessary for effective company operations leads the management.
- Raising Capital: Raising investments from investors is more convenient and easier for companies than LLPs.
- Preservation of Goodwill: Converting from an LLP to a private limited company allows the business to retain its established brand name and goodwill.
- Lower Taxation: Companies enjoy a lower income tax rate of 25%, as opposed to LLPs with a flat rate of 30%.
- Tax Benefits: The conversion from LLP to a company is exempt from capital gains tax. It also permits the carryforward of unabsorbed depreciation and losses.
Documents require for conversion:-
- Certificate of registration of the LLP
- LLP Agreement
- Statement of Assets & Liability Certified by CA
- Income Tax Return Copy of the LLP
- List of Partners along with their detailed particulars
- Declaration of directors confirmatory the particulars of all partners
- An affidavit from all the partners for dissolution of the entity.
- Newspaper advertisement
- Newspaper Advertisement (URC-2)
- NOC from all the Creditors
- NOC from the ROC where the LLP is registered.
Step-Wise Process to Convert LLP into a Company.
- Consent of all Partners of the LLP
The process starts with a meeting of all Partners to secure approval of all partners to the proposed conversion of LLP into a Private Limited Company according to section 366 of the Companies Act, 2013. In the partners meeting, two partners need to be authorized to sign and execute all papers to convert LLP into a company.
- Newspaper Publication
The intent to convert from an LLP to a company needs to be published in two newspapers, having circulation in the district, once in vernacular language and the other in an English daily. The public announcement in the newspaper must be made 21 clear days from the filing of URC-1.
- NOC From the ROC and Creditors
The NOC from the ROC, where the LLP Registered is required, and the Creditors must give their unconditional No Objection to the conversion of the LLP. If there is no Liability in the LLP, then a statement signed from the partners that there is no liability would be required.
- Apply for Name Reservation of Company in RUN
RUN is an online form in which an application for the name reservation is filed to the ROC. No change in the name of the LLP is allowed at this stage; the words LLP shall be substituted with “Private Limited.”
- E-file URC-1, MOA, AOA, DIR-2 Forms and Spice Plus
Finally, within 30 Days of the name reservation of the LLP, the application for conversion of the LLP into a company shall be filed in URC-1 along with the Spice Plus form, e-MOA, E-AOA and other documents. After the approval of the forms, the ROC issues a new certificate of incorporation in the company’s name.