Convert Private Limited Company to LLP

Following are the conditions for conversion:

–  All the members of the Company shall become the partners of the LLP on conversion.
– No security interest in the assets of the company should be subsisting or in force on the date of conversion i.e. the assets are free of any encumbrance.
– Up-to-date Income-tax return has been filed under the Income-tax Act, 1961.
– Any clearance, approval or permission for conversion of the company into Limited Liability Partnership, if required from anybody/ authority, etc. has been obtained.

On conversion of the Company/partnership into LLP, all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company/firm and the whole of the undertaking of the company shall be transferred to and vest in the Limited Liability Partnership without further assurance, act, or deed.

It has been provided in the Act that on conversion, any approval, permit or license issued to the Private Company under any other Act shall; subject to the provisions of such other Act under which such approval, permit or license was issued, be transferred in the name of converted entity viz. LLP. Barring some registrations like GST  or which a new application needs to be filed.

LLPs are required to file an annual filing with the Registrar each year. However, if the LLP has a turnover of fewer than ₹40 Lakhs and/or has a capital contribution of fewer than ₹25 Lakhs, the financial statements needs no auditing.

A basic difference between the LLP and a company lays in the internal governance structure. The LLP has more flexibility and less compliance requirements compared to a Company.

Yes, the LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate LLP in India, provided at least one designated partner is resident of India. However, the LLP/Partners would have to comply with all the relevant Foreign Exchange Laws/ Rules/ Regulations/ Guidelines.

In case of conversion to LLP, the decision regarding capital gain, whether applicable or not, is subject to certain conditions. Any transfer of the capital asset or intangible asset or shares held in the company by a shareholder as a result of the conversion of the company into a Limited Liability Partnership would not be subject to Capital Gain. But if there is a change in shareholding i.e. change in the profit sharing ratio and benefit arises from the conversion, then the capital gain would be payable.

In most cases, the terms of the license become the deciding factor whether or not they can be transferred. Otherwise, fresh GST registration or FSSAI registration would have to be obtained by the promoters.

The application of PAN and TAN in the name of LLP shall be applied after the issuance of Certificate of Incorporation of LLP. The physical copy of the PAN will be received at the Registered Office only after being dispatched by the Income Tax Department.