One of the decisions to be taken while starting a company is what type of company you want to incorporate. It is essential to choose the business structure carefully when registering your company. If you have already chosen a Pvt. and now want to convert PVT into an LLP, then this article is for you. Here we are going to tell you about the Procedure for Conversion of Private Limited Company into LLP.
What is a Private Limited Company?
There are companies where all the shares of the company are held privately. In this, you can conduct the business yourself or can appoint directors to manage the company on your behalf.
What is a Limited Liability Company?
The liability of all partners in an LLP is limited to their Investment. The personal property of the partners cannot be kept in this type of company. That’s the reason most individuals or businesses choose this as a partnership.
Some conditions need to be fulfilled for conversion for LLP Registration:
- All members of the company must agree upon the option of conversion.
- The LLP’s partners will become all of the members of the Pvt. company.
- The Registrar of Companies should have an up-to-date copy of the ITR.
- The conversion must be approved by the members and by all of the private company’s creditors.
- As per the Companies Act, no prosecution should initiate any process to be followed.
Required Documents for Conversion of Private Limited Company into LLP
- Consent of all directors and shareholders of the company
- It is necessary to obtain NOC from the tax authorities
- Consent of all creditors
- Last year financial statement ITR filled
- Digital signature of all existing directors
- Pvt. Ltd. company documents
Advantages of LLP Partnership Company
- At least money can be kept as capital in the formation of LLP. For this, there is no minimum capital requirement. This does not put a burden on their owners.
- It requires a minimum of 2 partners, and the maximum can be kept as many as you want.
- The cost of registering an LLP is less as compared to Pvt.
- All private companies are required to get their accounts audited, but in the case of LLP, there is no such requirement. In LLP, the audit has to be done only if the contribution by the partner is more than Rs. 25 lakhs or the annual turnover is more than Rs. 40 lakhs.
- LLP has to file only two documents, i.e., Annual Return Statement and Bank Account, Solvency Statement in a year.
- Provision of Tax on Dividend Distribution is not payable in the LLP company. Also, the deduction is allowed on any payment of interest, salary bonus, commission, or remuneration paid to partners under section 40(B).
Procedure for Conversion of Private Limited Company into Limited Liability Conversion
Step 1: Obtain DIN for designated partners who do not already have DIN.
Step 2: To consider the conversion request, the board will have to convene a meeting. For a corporation to be converted into an LLP, a board resolution must be enacted, and any director must be approved before applying for the LLP name.
Step 3: The company must apply for an LLP name reservation and acquire a name approval certificate from the ROC.
Step 4: Fill out the e-Form ROC with the documents mentioned above after filing the e-Form.
Step 5: Form 18 is used to convert a corporation into an LLP that must be filed with the incorporation form.
Step 6: The ROC issues a COI for conversion to LLP after the company has completed all processes and been approved by the ministry. COI contains information on the LLP agreement that these partners have signed that must be filled and submitted within 30 days.
Step 8: After receiving the LLP’s foundation certificate, the final document must be submitted within 15 days, followed by the conversion date.
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