Conversion of Private Limited Company to LLP in Chennai
Looking for a more flexible and cost-effective business structure? Converting a Private Limited Company into a Limited Liability Partnership (LLP) can be a strategic move for businesses seeking fewer compliance burdens, lower taxes, and operational flexibility. LLP in India is governed by the Limited Liability Partnership Act, 2008, this conversion allows companies to retain the benefits of a corporate entity while eliminating restrictions like mandatory audits and dividend distribution taxes. However, the process requires approval from the Ministry of Corporate Affairs (MCA) and adherence to specific legal conditions.
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What is an LLP?
A Limited Liability Partnership (LLP) is a hybrid business structure that combines a Private Limited Company and a Partnership Firm. It provides limited liability to partners while allowing flexibility in operations. Unlike a traditional partnership, an LLP offers separate legal entity status, meaning that the firm can own assets, enter into contracts, and operate independently of its partners.
Why Convert a Private Limited Company into an LLP in Chennai?
Businesses choose to convert their Private Limited Company into an LLP for multiple reasons:
- Lower Compliance Burden: LLPs have fewer legal compliances compared to Private Limited Companies.
- No Mandatory Audit: LLPs are not required to conduct statutory audits unless their turnover exceeds ₹40 lakh or capital contribution exceeds ₹25 lakh.
- Limited Liability Protection: Partners are not personally liable for the debts or liabilities of the LLP.
- No Dividend Distribution Tax (DDT): Unlike Private Limited Companies, LLPs do not pay DDT, reducing tax burdens.
- Fewer ROC Filings & Compliance Costs: LLPs do not require regular ROC filings like Private Limited Companies.
- Ideal for Small & Medium Enterprises: LLPs are best suited for businesses that do not plan to raise venture capital or issue shares to the public.
Legal Framework Governing LLP Conversion in Chennai
The conversion of a Private Limited Company to LLP is governed by:
- Limited Liability Partnership Act, 2008: It defines the structure and governance of LLPs in India.
- Companies Act, 2013: It specifies regulations regarding the conversion of companies.
- Income Tax Act, 1961: It covers tax implications of LLP conversions.
NOTE: Only unlisted Private Limited Companies without security interests in their assets can apply for conversion to an LLP.
Eligibility Criteria for Conversion
To convert a Private Limited Company into an LLP, the company must meet the following conditions:
- No Secured Loans or Charges: The company should not have outstanding loans or charges against its assets.
- All Shareholders Must Become LLP Partners: The existing shareholders of the Private Limited Company must become partners in the LLP.
- No Pending Compliance Issues: The company must be up to date with ROC filings, tax returns, and annual compliance.
- Minimum of Two Designated Partners: At least two designated partners must have Designated Partner Identification Numbers (DPINs).
- Consent of All Shareholders & Creditors: Written approval from shareholders and creditors is required.
Documents Required for LLP Conversion
You need to submit the following documents:
- Certificate of Incorporation & Memorandum of Association, and Articles of Association
- Board Resolution for LLP Conversion: A formal resolution passed by the board approving the conversion.
- Consent from Shareholders & Creditors: A written agreement confirming their approval.
- Statement of Assets & Liabilities: Latest financials audited by a Chartered Accountant.
- Income Tax Clearance Certificate: Confirmation that there are no pending tax dues.
- Partners’ PAN & Address Proof: PAN, Aadhaar, or Passport of all designated partners.
- Digital Signature Certificate (DSC) & DPIN: Digital signatures for document authentication.
Step-by-Step Process for Converting a Private Limited Company to LLP in Chennai
The conversion process involves multiple steps and approvals from the Registrar of Companies (RoC), which are as follows:
- Step 1: Apply for Digital Signature Certificate (DSC) & DPIN
All designated partners must obtain a DSC and a DPIN before filing LLP incorporation documents. - Step 2: Name Approval from MCA
Apply for LLP name approval through RUN-LLP on the MCA portal. The name should match or closely resemble the company’s existing name. - Step 3: File LLP Incorporation Form (FiLLiP)
Once the name is approved, file Form FiLLiP (Form for Incorporation of LLP) along with the required documents. - Step 4: Submit Application for Conversion (Form 17)
File Form 17 (Application and Statement for Conversion of Company to LLP) along with: - Board Resolution for Conversion
- Consent from Shareholders & Creditors
- Statement of Assets & Liabilities
- Income Tax Clearance Certificate
- Step 5: Execute LLP Agreement & File Form 3
Once RoC approves the conversion, draft and file the LLP Agreement (Form 3) within 30 days of incorporation. - Step 6: Obtain New LLP Incorporation Certificate
Once all filings are approved, the Registrar of Companies (RoC) will issue a Certificate of Incorporation as an LLP. - Step 7: Update Business Licenses & Tax Registrations
After conversion, update the company’s GST, PAN, TAN, bank accounts, contracts, and business licenses to reflect the LLP status.
Fee Payable for conversion of a Private Limited Company into an LLP:
- Application fee for the Form 8
- Stamp duty for the LLP Agreement
- Filing Fees to the RoC
Post-Conversion Compliance for LLPs
After the conversion, the LLP must fulfill these legal and tax obligations:
- File LLP Annual Returns (Form 8 & Form 11): Report financials and partner details.
- Maintain Proper Accounting Records: As per the LLP Act, 2008 guidelines.
- No Transfer of Assets or Liabilities: Conversion should be tax-neutral; assets must be transferred as they are.
- Intimate Stakeholders About the Change: Inform banks, vendors, and clients about the transition.
Why Choose Chennai Filings for LLP Conversion in Chennai?
At Chennai Filings, we ensure a smooth, legally compliant, and hassle-free LLP conversion process. Here’s why businesses trust us:
- Complete Documentation & Legal Support: We handle all ROC filings, resolutions, and approvals.
- MCA & Tax Compliance: We ensure compliance with the LLP Act, 2008 & Income Tax regulations.
- Quick Processing & Expert Consultation: Seamless transition with step-by-step guidance.
- Transparent Pricing & No Hidden Charges: Affordable legal services with clear pricing.
- Post-Conversion Assistance: We help with GST, tax filings, and LLP agreement drafting.
Convert Your Private Limited Company to LLP Today!
Looking to switch to an LLP structure? Chennai Filings ensures a legally compliant and hassle-free conversion process. Contact us today!
FAQ's
1. Can a Private Limited Company be converted into an LLP?
Yes, under the LLP Act, 2008, an unlisted Private Limited Company can be converted into an LLP.
2. How long does the conversion process take?
It usually takes 15-60 working days, depending on RoC approvals.
3. Can an LLP raise investment from venture capitalists?
No, LLPs cannot issue shares, making them unsuitable for raising venture capital.
4. Does LLP conversion affect ongoing contracts?
No, contracts remain valid, but you need to amend them to reflect the new LLP status.
5. What happens to the liabilities of the Private Limited Company post-conversion?
The LLP assumes all liabilities of the Private Limited Company, and partners will only be liable to the extent of their agreed contributions.