How to Convert Partnership Firm to LLP?
Starting a business as a partnership firm is common due to its low compliance and simple setup. But as the business grows, legal and financial risks often push partners to seek a more structured and secure model. This is where converting your partnership into a Limited Liability Partnership (LLP) becomes an ideal solution.
The LLP Act, 2008, under Section 55 read with Schedule II and Rule 38 of LLP Rules, 2009, allows an existing partnership firm to convert into an LLP - combining the flexibility of a partnership with the benefits of limited liability.
At LegalBabu, we offer end-to-end consulting for a smooth and compliant conversion of your partnership to an LLP, ensuring the business continuity, legal compliance, and tax advantages you need for sustainable growth.
Requirements to Convert Partnership Firm to LLP
Before starting the conversion process, certain eligibility and legal prerequisites must be fulfilled:
- All existing partners of the firm must become partners of the proposed LLP.
- No additional partners can be introduced during conversion.
- Written consent of all partners is mandatory.
- Partners must contribute capital in the same proportion as in the partnership.
- All secured creditors must give written No Objection Certificates (NOC).
- At least one designated partner must be a resident in India.
- Digital Signature Certificate (DSC) of one designated partner is mandatory.
- Latest Income Tax Return (ITR) of the firm should be filed prior to application.
Advantages to Convert Partnership Firm to LLP
Converting to an LLP brings several business and compliance advantages:
- Limited Liability Protection - Partners are not personally liable for business debts.
- Separate Legal Entity - The LLP enjoys corporate status, separate from its partners.
- No Limit on Number of Partners - Unlike traditional partnerships, LLPs can have unlimited partners.
- No Partner is Liable for Others Actions - The principle of mutual agency does not apply.
- Higher Creditworthiness - LLPs are considered more reliable by lenders due to transparency on the MCA portal.
- FDI-Friendly Structure - LLPs allow 100?I in sectors where automatic route is permitted.
- Eligibility for Government Schemes -LLPs can register under Startup India and avail tax exemptions, funding schemes, and benefits.
Procedure to Convert Partnership Firm to LLP
The conversion process involves the following legal steps:
Step 1: Name Reservation (RUN-LLP)
File RUN-LLP (Reserve Unique Name) to reserve the desired LLP name, preferably aligned with the partnership firm name, adding “LLP” at the end..
Step 2: File eForm FILLIP
Once the name is approved, submit Form FILLIP along with:
Utility bill and NOC of office premises
Subscribers sheet
Identity and address proofs of all partners
Consent of partners
NOC from the existing firm
Step 3: File eForm 17 - Application for Conversion
Submit eForm 17 with attachments:
Statement of assets and liabilities certified by a CA
List of creditors and their consents
Consent letter from all partners
Copy of the partnership deed
Latest ITR acknowledgment
Statement of partners (as per Schedule II)
Certificate of partnership registration, if available
Step 4: Registrar’s Approval
Upon verification, the Registrar of Companies (RoC) will issue a Certificate of Incorporation. In case of resubmission or rejection, the applicant may appeal to the tribunal.
Step 5: File Form 14 - Intimation to Registrar of Firms
Within 15 days of incorporation, file Form 14 manually with:
Certificate of Incorporation
LLP incorporation documents
Step 6: File LLP Agreement (LLP-3)
Within 30 days of incorporation, file Form LLP-3 to register the LLP Agreement detailing the rights, duties, and profit-sharing ratios.
Documents Required to Convert Partnership Firm to LLP
Below are the essential documents required for conversion:
- PAN cards and Aadhaar cards of all partners
- Passport-sized photographs
- Address and identity proofs
- Copy of partnership deed
- Latest income tax return of the firm
- Statement of assets and liabilities (CA certified)
- Creditors consent letters
- Consent of partners
- NOC from property owner (for office premises)
- Utility bill (not older than 2 months)
- NOC from any regulatory body (if applicable)
- DSC of designated partners
FAQS
FAQs on Converting Partnership to LLP
To know more about the conversion from Partnership to LLP
-
Is it mandatory to convert a Partnership Firm to LLP?
No, it's not mandatory. However, LLP offers benefits like limited liability and better credibility, making it a smart choice for growing businesses.
- Can a single partner convert a Partnership Firm to LLP?
- Do I need a new PAN after conversion?
- Will the existing firm’s registration number continue after conversion?
- Can the LLP continue using the old firm’s bank account?
- What happens to the assets and liabilities of the firm post-conversion?
- Will there be any capital gain tax liability on conversion?
- Is consent from all partners mandatory for conversion?
- Do I need to inform the Income Tax Department after conversion?
- Can a foreign national be a designated partner in the converted LLP?
- How long does the conversion process take?
- Can the LLP carry the same business name as the Partnership Firm?
- Is audit mandatory for an LLP post-conversion?
- Will GST registration need to be changed?
- Can an LLP be converted back to a Partnership Firm?
- Is stamp duty applicable during conversion?
- What happens to existing licenses or registrations of the firm?
- Can I convert an unregistered Partnership Firm to LLP?
- Are there any restrictions on the number of partners in an LLP?
- Why choose Legal Babu for the conversion?
