The shift from traditional partnerships to Limited Liability Partnerships (LLPs) has increased in recent years. The reason behind this is that LLPs offer more flexibility, unlimited partners and the like. But the real driving force behind the shift is due to the fact that LLPs offer a major advantage in terms of limited liability. The strain on the personal assets of the partner is put to rest when it comes to LLPs since they are ahybrid of both a partnership and a private limited company. Small and medium-sized businesses find this type of organisation structure to suit their needs very well.
The advantages of the Limited Liability Partnership (LLP) form of business outweigh those of the traditional partnership. Limited liability, perpetual succession and unlimited partners are the key incentives for a partnership firm to convert itself into an LLP.
Separate Legal Entity
Unlimited. Personal assets of the partners are also liable.
|Limited to the extent of their capital contribution.
|Books of Accounts
Should be prepared according to the provisions of the LLP Act.
Number of Members
|Maximum 20. In the case of
a banking business, the maximum number is 10.
|No limit on the maximum number of partners.
|Digital Signature Certificate (DSC)
|No such requirement.
|All designated partners of the LLP should have a Digital Signature which is a prerequisite for e-filing.
Apart from the key differences, there are a few features that make the LLP a more desirable option over a standard partnership firm:-
Step I – Name Approval and DSC
a. Name Approval
b. Digital Signature Certificates
Step II – Filing of the Forms with the RoC
a. Form 17 (Application and Statement for conversion of a firm into LLP)
The application form has to be filled in with information such as:
The following attachments are to be provided:
b. Form FiLLiP (Form for incorporation of LLP)
The application form is to be filled in with:
Attachments to be provided are:
Both the forms are to be e-signed by the proposed designated partners and certified by a Cost Accountant, a Company Secretary, or a Chartered Accountant or any of whom must be in whole-time practice. The fee to be paid will vary in relation to the amount of capital contribution.
Step III – Issue of Registration Certificate
The Certificate of Registration of the LLP shall be granted by the Registrar on approval of the application.
Step IV – LLP Agreement
The LLP Agreement has to be submitted in Form LLP – 3 within 30 days of incorporation of the LLP. It shall contain the following particulars:
Step V – Intimation to the Registrar of Firms
The Registrar of Firms has to be given intimation regarding the conversion into LLP and the related details of the LLP within 15 days from the date of the incorporation in Form – 14. The form has to be accompanied by:
– Copy of the LLP Incorporation Certificate.
– Copy of the incorporation documents submitted in Form FiLLiP. Once all these steps are complied with, it can be said that the conversion from a partnership to LLP is complete in all respects. Nevertheless, it is to be noted that the old licenses and permits do not transfer over to the LLP. They have to be freshly applied for post-conversion.
The Registrar, on receiving the relevant documents, may accept or refuse to register the LLP. If all documents are found correct in accordance with the provisions of the act, the Registrar shall issue a certificate of registration. The LLP will in less than 15 days of registration inform the Registrar of firms with which it is registered in Form 14. In the event of a refusal of registration by the Registrar, an appeal can be made with the tribunal.
Every partner will be jointly and severally liable for all the liabilities and obligations of the firm which were incurred before such conversion. If any partner discharges the obligation, then he shall be indemnified by the LLP.
The LLP shall provide for a period of 12 months, which begins from a date not later than 14 days after registration: – A statement that it was converted from a firm to a LLP as from the date of registration mentioned and – Name and registration number(if any) of the firm from which it was converted in every official correspondence of the LLP. In case the LLP contravenes the above provision it shall be punishable with a minimum fine of Rs 10,000 and a maximum fine of Rs 1,00,000. In case of continuing default, the minimum fine shall be Rs 50 per day, and the maximum shall be Rs 500 per day.
This form is an application and statement for the conversion of a firm into an LLP. The form is divided into 2 parts: Part A: Application and Part B: Statement.
Contents of the declaration
The e-form shall be digitally signed by a designated partner with details of DIN/DPIN of the designated partner and PAN number in case none of the designated partners have a DIN. The certification shall be done by a Chartered Accountant/Company Secretary/Cost accountant in full time practice. Selection of associate or fellow needs to be done, and membership number/certificate of practice number shall be provided. Intimation to the Registrar shall be provided in Form 14.
The following information shall be provided: – Name of the firm. – Principal address of the firm. – Details of the registration of the firm either under the Partnership Act 1932 or any other statute. Particulars of the LLP into which the firm has been converted shall also be provided. The copy of the certificate of incorporation of the LLP shall be attached, and the partner shall digitally sign the form.
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