Overview

In comparison to a standard partnership, a limited liability partnership (LLP) can be shown to be a far better business structure. Personal liabilities have an impact on partnerships, and LLPs do away with the Indian Partnership Act of 1932's overbearing requirements. In addition, there are tax advantages, no audit obligations below a specific capital threshold, no partner cap, and no capital contribution restrictions. Read through to know more about converting partnership to LLP.

Conditions For Converting a Partnership Firm to LLP

• According to Section 55 of the Limited Liability Partnership Act of 2008 read with Schedule II of the Act, a partnership firm must be converted to an LLP.
• There cannot be any new partners or for existing partners to stop being partners during the application process since all partners of the firm must be partners of the LLP.
• Before submitting such an application, at least two partners must have DPINs and all Partners must possess a current Digital Signature Certificate (DSC).
• The Partnership Act of 1932 requires that the partnership entity being converted be registered.
• The approval of all partners is required.
• The partners of the LLP must be the same as those of the partnership firm.
• After the conversion is finished, any partner who wants to leave the LLP can do so.
• All Designated Partners must receive a Director Identification Number (DIN) or Designated Partner Identification Number (DPIN).

Benefits of a Limited Liability Partnership

There are numerous benefits to LLP which will give clarity on why converting partnership to an LLP benefits the individual:

Separate Legal Entity:

• An LLP is a separate legal entity from its partners. Each partner can sue the other in case a situation arises.
• It has an uninterrupted existence that follows perpetual succession, i.e, the partners might leave, but the business will remain. A term of dissolution has to be mutually agreed upon by the firm, to dissolve.

Flexible Agreement:

Transferring the ownership of LLP is simple. A person can be quickly inducted in as a designated partner, and the ownership will switch to them.

Suitable For Small Business:

• LLPs with a capital of less than 25 lakhs and turnover less than 40 lakhs per year, do not require any formal audits. It makes registering as LLP beneficial for small businesses and startups.
• An LLP can own or acquire property because it is recognized as a juristic person. Partners of an LLP cannot claim the property as theirs.

No Owner /Manager Distinction:

An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, venture capitalists do not invest in the LLP structure.

Process To Register LLP in India

Here is the process to register LLP in India. Actolegal provides a seamless and hassle-free process and one can check here to know the quick and detailed process to register an LLP.

Step 1: Obtain Digital Signature Certificate (DSC)

Step 2: Apply for Director Identification Number (DIN)

Step 3: Name Approval

Step 4: Incorporation of LLP

Step 5: File Limited Liability Partnership (LLP) Agreement

Documents for an LLP Registration

When one plan to convert partnership to LLP, there are a few documents one must carry, here is the list:

To Be Submitted By Partners

• Scanned copy of PAN Card or passport (Foreign Nationals & NRIs)
• Scanned copy of Aadhar Card/ Voter's ID/Passport/Driver's License
• Scanned copy of latest bank statement/telephone/mobile bill or electricity/gas bill
• Scanned passport-sized photograph Specimen signature (blank document with signature [partners only])
• Note: Any one of the partners must self-attest the first three documents. In the case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).

For Registered Office

• Scanned copy of the latest bank statement/telephone/mobile bill, or electricity or gas Bill
• Scanned copy of the notarized rental agreement in English
• Scanned copy of No-objection certificate from the property owner
• Scanned copy of sale deed/property deed in English (in case of owned property)