{"id":3891,"date":"2020-02-21T09:08:41","date_gmt":"2020-02-21T09:08:41","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=3891"},"modified":"2024-06-18T10:38:36","modified_gmt":"2024-06-18T05:08:36","slug":"converting-existing-llp-into-private-limited-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/converting-existing-llp-into-private-limited-company\/","title":{"rendered":"Grow your Business by Converting Existing LLP into Private Limited Company"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Indian laws provide various options for setting up a business entity. In order to restrict liability exposure, individual may choose setting up of Limited Liability Partnership. But after some years when business gets perfectly established and becomes profit-making entity, he may wish to <a href=\"https:\/\/corpbiz.io\/conversion-of-llp-to-private-company\"><strong>convert LLP into Private limited company<\/strong><\/a> for inculcating equity or for the purpose of more growth.<\/p>\n\n\n\n<p>Here through this article, we will provide the provision of <strong>Companies Act, 2013<\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\">[1]<\/a><\/sup>, dealing with the requirements and provisions required for the conversion process of Limited Liability Partnership into Private Limited Company. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/converting-existing-llp-into-private-limited-company\/#What_is_Limited_Liability_Partnership_Company\" >What is Limited Liability  Partnership Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/converting-existing-llp-into-private-limited-company\/#What_to_choose_between_LLP_and_PVT_LTD_Company\" >What to choose between LLP and PVT LTD Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/converting-existing-llp-into-private-limited-company\/#What_are_the_advantages_of_conversion_of_LLP_to_Private_Limited_Company\" >What are the advantages of conversion\nof LLP to Private Limited Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/converting-existing-llp-into-private-limited-company\/#What_is_the_procedure_of_conversion_of_LLP_to_Private_Limited_Company\" >What is the procedure of conversion of LLP to Private\nLimited Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/converting-existing-llp-into-private-limited-company\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Limited_Liability_Partnership_Company\"><\/span>What is Limited Liability  Partnership Company? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Section 3<\/strong>\u00a0of<strong><em>\u00a0Limited Liability Partnership Act, 2008<\/em><\/strong>\u00a0defines Limited Liability Partnership as;<\/p>\n\n\n\n<p><strong>Limited\nLiability Partnership to be body corporate<\/strong><em>.\u2014<\/em><\/p>\n\n\n\n<ul>\n<li>An LLP is a corporate body incorporated under LLP Act, 2008, is a legal entity which separates legal entity from that of its partners;<\/li>\n\n\n\n<li>It shall have perpetual succession;<\/li>\n\n\n\n<li>Further, change in partner of <a href=\"https:\/\/corpbiz.io\/llp-registration\"><strong>Limited Liability Partnership<\/strong><\/a><strong> <\/strong>shall not affect the rights or liabilities or the existence of the LLP.&nbsp; <\/li>\n<\/ul>\n\n\n\n<p>Whereas, <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>Private Limited Company<\/strong><\/a> has been defined under Section 2 Clause 68 of Companies Act, 2013<\/p>\n\n\n\n<p><strong>Private Company\u201d<\/strong>&nbsp;means a\ncompany having a minimum paid-up share capital of one lakh rupees or such\nhigher paid-up share capital as may be prescribed, and which by its articles,\u2014<\/p>\n\n\n\n<ul>\n<li>&nbsp;Restricts the right to transfer its shares;<\/li>\n\n\n\n<li>&nbsp;Except in a case of&nbsp;One Person Company<strong>,<\/strong> Limits the number of its members to two hundred: Provided that where two or more      persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_to_choose_between_LLP_and_PVT_LTD_Company\"><\/span>What to choose between LLP and PVT LTD Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>For the small businesses which are looking to\nhave business for a reasonable time and makes the annual turnover less than Rs.\n40 Lakhs, and capital contribution of fewer than 25 lakhs. <\/li>\n\n\n\n<li>LLP\u2019s fulfilling the above conditions are not\nrequired to conduct an audit every year, whereas Private Limited Companies\nirrespective of their turnover requires an audit of financial statements. To\nmeet the necessary compliances, private companies have to bare additional cost\nand compliances.<\/li>\n\n\n\n<li>However, in the case where LLP crosses an annual\nturnover of Rs.40 lakhs or crosses the capital contribution of more than Rs.25\nlakhs, the compliance requirements for LLP and Private Limited Company become\nalmost same. Hence, <strong><em>therefore incorporating Private Company is a better choice. <\/em><\/strong><strong><em><\/em><\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_advantages_of_conversion_of_LLP_to_Private_Limited_Company\"><\/span>What are the advantages of conversion\nof LLP to Private Limited Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Preservation of Brand\nValue:&nbsp;<\/strong><\/p>\n\n\n\n<p>Conversion of LLP into Private Limited Company facilitates business entities to continue the brand name without making any further efforts on brand advertisements.<\/p>\n\n\n\n<p><strong>Carry forward of unabsorbed\nlosses and depreciation<\/strong>: <\/p>\n\n\n\n<p>After the conversion, no\nexpenditure will be incurred on bookkeeping, as the losses and depreciation\nincurred in LLP will be carried forward on the conversion of entity<\/p>\n\n\n\n<p><strong>Employee Stock Ownership\nPlan to employees<\/strong>: <\/p>\n\n\n\n<p>Conversion of LLP to\nPrivate Company facilitates Companies to offer stock ownership and ESOP plans. Such\nplans help companies to attract efficient employees, as it offers incentive\nplans for them to work in the company.<\/p>\n\n\n\n<p><strong>Easy Fund Raising:<\/strong>&nbsp;<\/p>\n\n\n\n<p>If the company registration\nprocess is strict, it helps the company structure to be more credible among\nothers. This leads to easy fundraising from external sources. <\/p>\n\n\n\n<p><strong>Separate Legal Existence:<\/strong>&nbsp;<\/p>\n\n\n\n<p>Conversion of company\nfacilitates the separate ownership and management to pay attention to their\npotential work. The Shareholders assign responsibility to run and operate the company\nwithout losing control in form of voting.<\/p>\n\n\n\n<p><strong>Limited Liability of Owners<\/strong>: <\/p>\n\n\n\n<p>Conversion prohibits the liability of the owners only to the capital subscribed and unpaid by them.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/difference-between-opc-and-llp-and-opc-advantage\/\">Comparison between OPC and LLP: Advantage of One Person Company<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_procedure_of_conversion_of_LLP_to_Private_Limited_Company\"><\/span>What is the procedure of conversion of LLP to Private\nLimited Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>Below mentioned procedure explains the conversion of an LLP into Private Limited Company:<\/em><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" width=\"1024\" height=\"427\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/Procedure-of-conversion-of-LLP-to-Private-Limited-Company-1024x427.png\" alt=\"procedure of conversion of LLP to Private Limited Company\" class=\"wp-image-3909\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/Procedure-of-conversion-of-LLP-to-Private-Limited-Company-1024x427.png 1024w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/Procedure-of-conversion-of-LLP-to-Private-Limited-Company-300x125.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/Procedure-of-conversion-of-LLP-to-Private-Limited-Company-768x320.png 768w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/Procedure-of-conversion-of-LLP-to-Private-Limited-Company.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Obtain Name Approval<\/h3>\n\n\n\n<p>At very first stage<strong>, <\/strong>the company needs to obtain\nname approval from the Registrar of Companies (ROC) by submitting Reserve\nUnique Name (RUN) form, which is available in e-format.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Securing DSC and DIN<\/h3>\n\n\n\n<p><strong>Secondly, <\/strong>after obtaining\nname approval, applicant is required to apply for the Digital\nSignature Certificate (DSC) and Director Identification Number (DIN), against\nthe member of LLP. The member will further be the director of the Private\nLimited Company after conversion.<\/p>\n\n\n\n<p>Further,\nif there is non-applicability of DIN, the applicant needs to furnish the\ndetails in regards to address proof, identity proof and photographs along with\nthe application. Therefore, applicant can obtain DIN directly through filing incorporation\nform.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Filing of Form URC-1<\/h3>\n\n\n\n<p><strong>Further, <\/strong>applicant is\nrequired to file Form URC-1, along with the following list of documents;<\/p>\n\n\n\n<ul>\n<li>Details such as name, address and shares held by the members      along with the member\u2019s list.<\/li>\n\n\n\n<li>Furnish the details such as Name, Address, DIN, passport number along with an expiry date of all the directors of the Private Limited Company.<\/li>\n\n\n\n<li>Also, file all mandatory documents with the Registrar of Companies for the registration of the company.<\/li>\n<\/ul>\n\n\n\n<div class=\"shadow1\"><strong>Note:<\/strong> The details provided by the company should be complete, correct and accurate to the best of their knowledge.<\/div>\n\n\n\n<ul>\n<li>Copy of Limited Liability Partnership agreement with a list attached      mentioning the name and address of the partners of LLP and a certified copy of registration which is duly verified by at least two designated partners of LPP is required.<\/li>\n\n\n\n<li>The statement with the details of the nominal share capital of the firm and the number of shares separated the number of shares taken      and the amount remitted for each share and the name of the firm with the word private limited to be provided.<\/li>\n\n\n\n<li>No-objection certificate from all the creditors has to be provided.<\/li>\n\n\n\n<li>Duly certified accounts statement of the company by the auditor, which should not be less than six days from the date of application and the copy of the newspaper advertisement is required.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Memorandum of Association &amp; Articles of Association<\/h3>\n\n\n\n<p>Applicant is required to draft Memorandum of\nAssociation (MOA) and Article of Association (AOA). Further, submit to the\nregistrar of companies. Once the company name gets approved, ROC will sanction\nthe form URC- 1.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The main reason to convert LLP to Pvt. Ltd Company is more growth in business. LLP structures are not considered to be suitable for the venture capitalists or for private equity, as investor feels comfortable to invest in private limited company. For the purpose of FDI also, private limited companies are considered to be as the preferable choice over LLP. Hence, the conversion of LLP to private limited company can be a wise decision and shall be performed by taking all prescribed regulations into consideration. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/partnership-firm-registration-procedure-and-regulations\/\">\nPartnership Firm Registration: Definition, Regulations, and Registration Procedure\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Indian laws provide various options for setting up a business entity. In order to restrict liability exposure, individual may choose setting up of Limited Liability Partnership. But after some years when business gets perfectly established and becomes profit-making entity, he may wish to convert LLP into Private limited company for inculcating equity or for the [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":3892,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[120,340],"tags":[346],"acf":{"service_id":"321"},"authorName":"Shailza Sharma","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/10\/IMG-20190927-WA0001-150x150-22.jpg","authorDescription":"Miss Shailza Sharma, BA. LLB graduate from Himachal Pradesh University. She holds an experience of 2.5 years in various Legal companies and organizations.","postViews":6988,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/3891"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=3891"}],"version-history":[{"count":21,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/3891\/revisions"}],"predecessor-version":[{"id":64814,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/3891\/revisions\/64814"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/3892"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=3891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=3891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=3891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}