Conversion of LLP into Private Limited Company

LLPs are converting into Private Limited in order to get better opportunities for business growth and expansion.

Topics covered –

Limited Liability Partnership

LLP is governed under the Limited Liability Partnership Act, 2008. It is a mixed structure of Partnership Firm and Private Limited Company as it is a kind of Partnership firm having Limited liability of Partners and separate legal entity of LLP.

Click here to read more about LLP.

Private Limited Company

Private Limited Company is a form of business structure. Private Limited is an artificial person having its own common seal. Its members have limited liability that is they are liable up to the shares held by them.

Click here to read more about Private Limited Company.

Similarities between LLP and Private Limited Company

Separate Legal Entity	Both are Separate Legal Entity
Tax Benefits	Both of the businesses can get Tax Benefits
Limited Liability	The liability of members of both companies is liability. Thus, they shall be liable only to the extent of shares held by them
Registration with MCA	Both are required to be registered with Ministry of Corporate Affairs

Comparison between LLP and Private Limited Company

BASIS	LLP	Private Limited Company
Applicable Law	LLP Act, 2008	Companies Act, 2013
Minimum Share Capital	N/A	No requirement
Minimum Authorized Share Capital	N/A	1 Lakh
Members	Minimum – 2 Maximum – No limit	Minimum – 2 Maximum – 200
Directors	Minimum – 2 Designated Partners Maximum – N/A	Minimum – 2 Maximum – 15
Board Meetings	N/A	Minimum 4 every year
Transferability of Shares	Shares can be transferred only through contract	Shares can be easily transferred
Name	Must end with LLP	Must end with Private Limited

Conversion of LLP into Private Limited

Conversion of LLP into Private Limited Company is a process by which an LLP is converted into Private Limited in order to avail the benefits of private limited and for better opportunities of growth & expansion.

Conversion of LLP into Private Limited Company is governed under the Companies Act, 2013.

Pre-Requisites for Conversion

According to the Companies (Authorized to Register) Amendment Rules, 2018, there must be at least two partners in LLP who shall become the member of Private Limited after the conversion.
LLP must be registered with MCA.

Benefits of Conversion of LLP into Private Limited

Preserve the Brand Value of LLP

If LLP wants to expand its business in Private Limited Company then by converting it into Private Limited, it can preserve the brand value of the LLP without making any extra efforts on brand.

Carry Forward the Unabsorbed Losses & Depreciation

When the LLP is converted into Private Limited then LLP can carry forward its unabsorbed losses & depreciation on the converted business structure.

External Fund

It is comparatively easy for Private Limited Company to raise external funds as investors trusts Private Limited more.

High Turnovers

Private Limited Company is mainly considered ideal for those kinds of businesses who have high turnovers and the businesses which require more external funds to achieve goals.

Mandatory Documents required for Conversion of LLP into Private Limited

Proposed Shareholders and Directors

PAN Card
ID Proof – Driving License/ Passport/ Voter ID Card
Latest Passport Size photographs
Address Proof – Bank Statement (not older than 2 months)

2. LLP

LLP Deed
Copy of latest Income Tax Return
Copy of latest audited Financial Statements
Copy of Registered Address Proof (of the Proposed Company)

Process : Conversion of LLP into Private Limited Company

Publish Advertisement in Newspaper – Form URC-2

- The first step for conversion of LLP into Private Limited is to publish an advertisement in 2 newspapers in notice form about the Conversion under the Companies Act, 2013.
- It must be published in Form URC-2 given on MCA portal.
- The main object of publishing this advertisement is to inform the general public about the conversion so that any person having objection can raise objections thereon within 21 days from the date of advertisement publication.

2.Obtain DSC & DIN

- The next step is to obtain Digital Signature Certificate & Director Identification Number if the proposed directors and shareholders do not have DSC or DIN.

3.Name Approval

- The next step to convert LLP into Private Limited is to get the Name Approval of proposed Private Limited. For Name Approval, LLP is required to submit Name Approval form ‘Reserve Unique Name (RUN)’ with Ministry of Corporate Affairs.
- When the name is approved then the LLP has 20 days to complete the further process as the name is available for use for 20 days only. It is 60 days period in case of change of name of existing company.

4.File Form URC-1

- Thereafter, the applicant is required to file the Form URC-1for conversion of LLP into Private Limited Company with the Registrar of Companies. The applicant shall be careful while filling the form that is all the details including name, address, shares held by proposed shareholders are correctly filled. The applicant shall also ensure that all the required documents are attached therewith.

Following is the list of documents to be attached with URC-1

Consent to act and not disqualified to act as director
No objection certificate from all the creditors of LLP
Duly Certified Statement of accounts (not older than 6 days preceding the application of conversion)
Copy of LLP Agreement
Certificate of Registration of LLP
Copy of Newspaper Advertisement
List of details of all the proposed Members (Names, addresses, shares to be held by them and so on)
List of proposed first directors of the Company along with their details (Names, address, DIN and other required details)

5.MOA & AOA

- When the applicant has received sanction of form URC-1 from the ROC then the applicant has to draft MOA & AOA of the proposed company. Thereafter, the applicant has to submit the MOA & AOA with the MCA.

6.Certificate of Incorporation – INC-11

- Lastly, the ROC shall scrutinize and examine all the submitted documents and if it is satisfied with all the documents then it shall issue the certificate of Incorporation of Private Limited Company in Form INC 11.