Easily Convert LLP to Private limited Company

How to Convert LLP to Private Limited?

Converting an LLP to a Private Limited Company is a strategic move for businesses seeking scalability, funding, and greater credibility. The process is legally permitted under Part I of Chapter XXI of the Companies Act, 2013.

To initiate the conversion, all LLP partners must consent, and at least two must become directors in the new company. Key steps include obtaining name approval, securing DSC and DIN, drafting incorporation documents, filing Form URC-1 and SPICe+, publishing a public notice, and receiving a new Certificate of Incorporation. All assets, liabilities, and agreements of the LLP are transferred to the new company without disruption.

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Requirements to Convert LLP to Private Limited

Before initiating the conversion from LLP to Private Limited, certain preconditions must be fulfilled:

1. Minimum two partners of the LLP must become directors in the new private limited company.
2. All LLP partners must consent to the conversion.
3. The LLP must have complied with all statutory filings and annual returns.
4. A No Objection Certificate (NOC) must be obtained from the Registrar of LLPs.
5. The proposed conversion must be publicly notified in two newspapers (one English and one vernacular).
6. All existing assets and liabilities must be transferred to the new company without alterations.

Advantages to Convert LLP to Private Limited

The shift from LLP to a private limited company offers multiple benefits:

1. Easier Fundraising: Private companies can raise funds through equity investment, venture capital, or issue of debentures, which is much more flexible than LLPs.
2. Tax Benefits: While LLPs are taxed at a flat 30%, private companies (with turnover up to ?400 crore) enjoy a lower tax rate of 25%, leading to significant savings.
3. Scalability and Growth: Private companies are better structured for scaling operations, acquiring businesses, or transitioning into public limited companies in the future.
4. Retention of Brand Identity: During conversion, the business can retain its name, brand, goodwill, and existing contracts, making it seamless in the eyes of customers and vendors.
5. Access to Foreign Investment: Foreign Direct Investment (FDI) is permitted in private companies under the automatic route, unlike LLPs where it is more regulated.
6. ESOPs for Employees: A private company can issue Employee Stock Option Plans (ESOPs) to attract and retain talent — a major limitation in LLPs.

Procedure to Convert LLP to Private Limited

The procedure for converting an LLP into a private limited company involves a series of legal steps, requiring careful documentation and filing. Here’s a breakdown:

Step 1: Obtain Name Approval
Apply for a unique company name through the RUN (Reserve Unique Name) facility on the MCA portal.

Step 2: Obtain DSC and DIN
The Designated Partners of LLP must obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN).

Step 3: Draft Incorporation Documents
Prepare the Memorandum of Association (MoA) and Articles of Association (AoA) reflecting the objectives and structure of the new company.

Step 4: File Conversion Forms

The following forms must be filed with the Ministry of Corporate Affairs:

• Form URC-1 (for incorporation of company from existing LLP)
• Form SPICe+ (INC-32) – company registration form
• AGILE-PRO – for GST, ESIC, EPFO, bank account, etc.
• INC-9, DIR-2, and other required affidavits and declarations

Step 5: Issue Share Certificates
Upon incorporation, the company must issue share certificates to all ex-partners of the LLP in the same capital proportion.

Step 6: Publish Public Notice
A notice of conversion must be published in two newspapers (one English and one regional language) within 21 days.

Step 7: Receive Certificate of Incorporation
Once all documents are verified and approved, the Registrar of Companies (RoC) will issue a new Certificate of Incorporation, completing the conversion process.

Documents required to Convert LLP to Private Limited

Here’s a comprehensive list of documents needed for the conversion of  LLP to Private Limited:

1. Consent of all LLP partners
2. NOC from creditors
3. Latest LLP agreement and Certificate of Incorporation
4. Address proof of registered office
5. Utility bills (not older than 2 months)
6. PAN and Aadhar of all directors
7. Digital Signature Certificates (DSC)
8. Director Identification Numbers (DIN)
9. Affidavits, declarations, and newspaper publication proofs
10. Draft MoA and AoA