How To Convert Your Partnership Into An LLP Work?
Conversion of a partnership firm into an LLP is better because a business will acquire tax benefits and no audit necessities below a certain capital.
Partnership to LLP
A Limited Liability Partnership (LLP) can prove to be a much better business vehicle than a regular partnership. Partnerships are affected by personal liabilities, and LLPs remove excessive regulations of the Indian Partnership Act, 1932. Furthermore, there are tax benefits, no audit requirements below a certain capital, no cap with regard to a number of partners or capital contribution requirements.
Benefits of a Limited Liability Partnership
Separate Legal Entity:
- An LLP is a separate legal entity from its partners. Each partner can sue the other in case a situation arises.
- It has an uninterrupted existence that follows perpetual succession, i.e, the partners might leave, but the business will remain. A term of dissolution has to be mutually agreed upon by the firm, to dissolve.
Transferring the ownership of LLP is simple. A person can be quickly inducted in as a designated partner, and the ownership will switch to them.
Suitable For Small Business:
- LLPs with a capital of less than 25 lakhs and turnover less than 40 lakhs per year, do not require any formal audits. It makes registering as LLP beneficial for small businesses and startups.
- An LLP can own or acquire property because it is recognized as a juristic person. Partners of an LLP cannot claim the property as theirs.
No Owner /Manager Distinction:
An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, venture capitalists do not invest in the LLP structure.
Checklist qualities of an LLP in India
Separate Legal Entity:
- Starting a business requires specific requirements to be eligible for registering as an LLP.
- The normal partnership structure of an LLP shares the same attributes when it comes to internal management, profit distribution, and tax liabilities. But, it offers the partners less financial liability (limited liability).
- Any business who has, at least two partners are required to form an LLP. There is no limit to the maximum number of partners.
- The nomination of a natural person, if a body corporate is a Partner.
- No shared capital requirement, though each partner must have an agreed contribution towards it.
- Minimum capital contribution: There is no minimum capital requirement for an LLP (or a company, for that matter). The LLP should have an authorized capital of at least Rs. 1 lakh.
- At least one designated partner has to be an Indian resident
- DPIN for all Partners
- DSC (Digital signature certificate) for all the Designated Partners
- Address proof for the office of LLP. The registered office of an LLP does not have to be a commercial space. Even a rented home can be the registered office, so long as an NoC is obtained from the landlord.
- With regard to the changes in FDI regulations dated November 10, 2015, foreign investors are now permitted to have 100% FDI automatically. The 100% FDI in LLP is granted to foreign companies who operate in activities or sectors where 100% FDI is considered permissible through the channels of the automatic route. Also, there should not be any performance pre-requisites that are linked to FDI. A definite interpretation of the terms such as ‘ internal accruals’ and ‘ownership and control’ has been provided with reference to the LLP. Thus, Foreign investment is made smoother and quicker with FDI in LLP.
- The LLPs will also be permitted to opt for downstream investment in a different company or even choose LLP in those sectors which allow 100% FDI in accordance with the automatic route. This does not come up with any performance constraints that are FDI linked.
- ould file an annual financial accounts statement and annual returns with the registrar of the company every year.
Registering a company offers many benefits. A registered company makes it genuine and increases the authenticity of your business.
- Shields from personal liability and protects from other risks and losses.
- Attracts more customers
- Procures bank credits and good investment from reliable investors with ease.
- Offers liability protection to protect your company’s assets
- Greater capital contribution and greater stability
- Increases the potential to grow big and expand
- You will also get Zero Balance Current Account – Powered by DBS Bank *
- Shareholders have a right to appoint the directors to act on behalf of him.
- Unlike a sole proprietorship, even after the death of directors/ shareholders company will exist without any discrepancies.
- The shareholders and the directors will get complete immunity from being sued by the third party except personal issues.
- It attracts lower tax rates and subsidies under the Income Tax Act, 1961.
- The profit of the private limited company is subjected to the tax rate of 30% + surcharge & cesses as applicable.
Quick and easy steps to register LLP in India - A detailed process
At Buiznest, we make the process of LLP registration seamless and hassle-free.
- Arrange basic documents of Partners
- Fill in an online form with accurate information
- Apply for Digital Signature and DIN of Partners
- Prepare all legal documents
- Apply to name availability of the proposed LLP
- Verification of all documents and forms by the respective Government dept and authorities
- File Incorporation Docs with ROC
- Get LLP Incorporation Certificate
- Drafting of LLP Agreement
- Filing of LLP Agreement
Step 1: Obtaining DSC And DIN
The first step is to obtain DSC of the desired partners of Limited Liability Partnership. The reason for this is that all the forms need to be submitted online and require the directors’ digital signatures. The law also requires that all directors file for a DIN number. The application has to be made in Form DIR- 3.
Step 2: Application For Name Approval
This process involves registering the LLP. Before doing this, you would need to see if the name is already taken. You can check on the free search facility on the MCA portal. The registrar only approves LLP names that are not taken before.
The approval of the name will be made by the Registrar only if the Central Government does not deem it undesirable. The name should also not hold any resemblance to any of the existing partnership firms, LLPs, trademarks, or body corporates.
Step 3: LLP Agreement
LLP agreement is very crucial in a limited liability partnership as it determines the mutual rights and duties amongst the partners, and between the LLP and the partners. The partners enter into the LLP agreement upon the LLP registration by filing form 3 online on the MCA portal. This procedure has to be done within 30 days of the date of incorporation.
Step 4: LLP Incorporation Certificate
Once the registrar approves your MOA and AOA, you’re steps closer to getting your LLP registered. The next step is to get the LLP Incorporation Certificate. You can do it by submitting all the documents to the registrar. The time frame is between 2- 12 days. Once you get your LLP Incorporation Certificate, you’re ready to go.
Step 5: Apply For PAN & TAN & Bank Account
As soon as you get the incorporation certificate, you need to apply for your company PAN & TAN with the NSDL. The cost for this procedure is less than Rs.200 and it takes around three weeks to get done.
Documents required for LLP registration in India
The method of LLP registration in India does not require much legwork when it comes to documents.
To Be Submitted By Partners
- Scanned copy of PAN Card or passport (Foreign Nationals & NRIs)
- Scanned copy of Aadhar Card/ Voter’s ID/Passport/Driver’s License
- Scanned copy of latest bank statement/telephone/mobile bill or electricity/gas bill
- Scanned passport-sized photograph Specimen signature (blank document with signature [partners only])
- Note: Any one of the partners must self-attest the first three documents. In the case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).
For Registered Office
- Scanned copy of the latest bank statement/telephone/mobile bill, or electricity or gas Bill
- Scanned copy of the notarised rental agreement in English
- Scanned copy of No-objection certificate from the property owner
- Scanned copy of sale deed/property deed in English (in case of owned property)
How Buiznest Helps With The LLP Registration Process?
With Buiznest, registering an LLP is one of the easiest processes in India. We make the entire compliance procedure simple and provide our best efforts to complete the process as early as possible. When you choose us to be your partner to register LLP, you get to avail of a few undeniable benefits. The Ministry of Corporate Affairs comes up with updates to the LLP process and Buiznest takes care of them for you.
- DSC for one director and DIN for up to three directors
- Drafting of MoA & AoA
- Registration fees and stamp duty
- Company Incorporation Certificate
We also provide assistance with:
- Free consultation, followed by subsequent meetings to clear every concern you may face.
- Complete support on opening a current bank account
- Comprehensive and on-time updates on ROC compliances.
- Online accounting software valid for one year.
- A master file that contains all the documents needed to file the incorporation.
- A dedicated service manager is present at all times.
- Being a separate legal entity from the existing partnership firm, LLP will have its own pan card, and a new/separate GST Registration on the name of LLP.
- You will also get zero balance current account!
60 Established Vendors
Buiznest has successfully completed 600+ registrations in the past year alone. We have partnered with some of the top experts in business across India to get your registration across to you on time.
9.1 Customer Score
We make your interaction with the government as smooth as is possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.
200+ Strong Team
Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we’ll try to ensure that your doubts are cleared before they even arise.
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