Conversion of LLP to Private Limited Company

If you currently run a Limited Liability Partnership (LLP) and are considering growing your business, converting it to a Private Limited Company could be a good option. Private Limited Companies offer better access to funding, enhanced credibility, and more growth potential, especially when you want to attract investors or expand your business.

In this blog, we’ll break down the benefits, documents you’ll need, and steps involved in converting your LLP into a Private Limited Company, in a clear and simple way.

Why Convert Your LLP to a Private Limited Company?

Here are a few common reasons why many businesses switch from LLPs to Private Limited Companies:

1. Limited Liability: Like an LLP, a Private Limited Company also protects the personal assets of shareholders in case of financial trouble or business debts.
2. Easier Fundraising: A Private Limited Company can issue shares to investors, which makes it easier to raise funds compared to an LLP.
3. More Credibility: A Private Limited Company structure tends to be more trusted by banks, customers, and other businesses.
4. Tax Advantages: Depending on your business size and nature, a Private Limited Company may offer better tax benefits than an LLP.
5. Better for Growth: If you’re aiming for rapid expansion or venture capital funding, converting to a Private Limited Company can open up more opportunities.

Are You Eligible to Convert Your LLP?

Before you move forward with the conversion, check if your LLP meets these criteria:

• All partners in the LLP must agree to become shareholders in the new Private Limited Company.
• The LLP must be registered under the Limited Liability Partnership Act, 2008.
• If the LLP has any secured debts, you must get consent from creditors to convert.
• After conversion, the company needs to have at least two directors and two shareholders.

Documents You’ll Need for the Conversion

To convert your LLP into a Private Limited Company, you’ll need to gather the following documents:

1. LLP Agreement
   A copy of the original LLP agreement and any changes made to it.
2. Consent of Partners
   A signed resolution from all partners, agreeing to convert the LLP into a Private Limited Company.
3. List of Creditors
   A list of creditors, along with their consent if required.
4. Financial Statements
   Audited financial statements for the LLP, including the balance sheet and profit and loss statement.
5. Digital Signature Certificate (DSC)
   Digital signatures for at least two of the LLP’s partners who will become directors in the new company.
6. Director Identification Number (DIN)
   Directors need a DIN. If they don’t have one, you can apply for it during the conversion process.
7. Proof of Registered Office
   Documents showing the address of the registered office, such as rent agreements or ownership papers, plus a No Objection Certificate (NOC) from the property owner if it’s rented.
8. ID and Address Proof for Directors and Shareholders
   PAN cards, Aadhar cards, and address proofs (like utility bills or passports) for all directors and shareholders.

Step-by-Step Guide to Convert Your LLP to a Private Limited Company

Here’s a quick guide to help you through the conversion process:

Step 1: Get Name Approval

First, you’ll need to get approval for the name of your new Private Limited Company. Use the RUN (Reserve Unique Name) service on the Ministry of Corporate Affairs (MCA) website. Make sure the name is unique and not similar to any other registered company.

Step 2: Submit the Conversion Application

Once the name is approved, file Form URC-1 with the Registrar of Companies (ROC). This form will ask for details about your LLP, including information on the partners, assets, liabilities, and directors of the new company.

Step 3: Prepare the Memorandum and Articles of Association

Draft the Memorandum of Association (MOA) and Articles of Association (AOA) for your Private Limited Company. These documents outline the company’s purpose and its operational guidelines.

Step 4: Submit Incorporation Documents

File the following documents with the ROC:

• Form INC-33 for the Memorandum of Association (MOA)
• Form INC-34 for the Articles of Association (AOA)
• Form INC-32 (SPICe+) for incorporation and DIN application

Step 5: Publish a Public Notice

You’ll need to publish a public notice in both an English and a local language newspaper announcing the conversion. This notice allows any objections to be raised within 21 days.

Step 6: Get the Certificate of Incorporation

After reviewing and approving your documents, the ROC will issue a Certificate of Incorporation. Your LLP is now officially converted into a Private Limited Company.

Step 7: Update Bank and Tax Records

Once you receive the Certificate of Incorporation, update your bank accounts and tax records (such as PAN and GST) under the new Private Limited Company name.

Important Points to Remember

• Continuity of Business: The business remains the same after the conversion. The contracts, assets, and liabilities from the LLP will be transferred to the new Pvt ltd.
• Costs Involved: There will be various filing and processing fees, which may vary depending on your state and the size of the business.
• Professional Help: Consider hiring a chartered accountant or company secretary to help you navigate the conversion process smoothly.

Conclusion

Converting an LLP into a Private Limited Company is a strategic decision that can help your business grow, attract investment, and operate more efficiently. By following the proper steps and submitting the required documents, you can ensure a smooth transition from an LLP to a Private Limited Company.