Business Incorporation & Compliance

Converting a Limited Liability Partnership (LLP) into a company or a company into an LLP involves several legal, procedural, and compliance-related steps. This decision is often driven by the need for structural advantages, operational flexibility, fundraising, or reduced compliance costs.

Conversion of LLP into a Private Limited Company

This process is commonly pursued by LLPs aiming for scalability, access to equity funding, or the corporate benefits associated with a company structure. The process is governed by the Companies Act, 2013, and relevant rules.

Key Steps in LLP to Private Limited Company Conversion

1. Name Reservation:
   • File an application with the Registrar of Companies (ROC) through the RUN (Reserve Unique Name) portal to reserve the desired name for the company.
   • Ensure the name complies with the naming guidelines of the Companies Act.
2. Consent of Partners:
   • Obtain the unanimous consent of all partners in the LLP for conversion.
   • Pass a resolution in the LLP to authorize the conversion process.
3. Application Filing (Form URC-1):
   • File Form URC-1 with the ROC, containing:
     • Details of all partners/members.
     • Statement of assets and liabilities certified by a chartered accountant.
     • Consent of all creditors for the conversion.
     • A copy of the LLP agreement.
     • A no-objection certificate (NOC) from the tax authorities.
4. Submission of Incorporation Documents:
   • Prepare and file the Memorandum of Association (MOA) and Articles of Association (AOA).
   • Attach forms such as DIR-12 (for appointment of directors), INC-9 (declaration by subscribers), and others as required.
5. Certificate of Incorporation:
   • Upon verification of documents, the ROC issues a certificate of incorporation, formalizing the transition.
   • The LLP ceases to exist as a separate entity.

Benefits of Conversion to a Company

• Access to equity funding and venture capital.
• Enhanced credibility and brand perception.
• Limited liability protection for shareholders.
• Opportunity to expand operations and business scale.

Conversion of Private Limited Company into LLP

Many companies opt to convert into LLPs to benefit from operational flexibility, reduced compliance burden, and tax advantages. This process is governed by the LLP Act, 2008, and applicable company laws.

Key Steps in Company to LLP Conversion

1. Name Reservation:
   • File Form RUN-LLP to reserve the LLP’s name with the ROC.
   • Ensure the name matches the company’s existing name as closely as possible.
2. Approval from Stakeholders:
   • Obtain consent from all shareholders and creditors for the conversion.
   • Pass a special resolution at a general meeting to authorize the conversion.
3. Application Filing (Form 18):
   • File Form 18 (Application for Conversion) and Form 2 (Incorporation Document).
   • Attach:
     • Statement of accounts showing no outstanding debts.
     • Declaration of solvency by directors.
     • Consent of shareholders.
4. Certificate of Incorporation:
   • Upon approval, the ROC issues a certificate of incorporation for the LLP, officially marking the transition.
   • The company is then struck off from the company register.

Benefits of Conversion to LLP

• Simplified compliance requirements.
• Lower regulatory costs.
• Flexible operational structure.
• Tax benefits, as LLPs are taxed only on profits distributed to partners.