Conversion of company to LLP

All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid. Only intimation to be given to respective authorities for change of name.

TAX EFFECT WHILE CONVERSION: Section 47(xiiib)of IT Act, 1961

Following shall not be regarded as a”transfer”, therefore, no capital shall arise on the following:      

1. Any transfer of a capital asset or intangible asset by a private company or unlisted public company to a limited liability partnership.

2. Any transfer of a share or shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008.

Conditions for claiming exemption:  

1. All the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership.

2. (a) All the shareholders of the company immediately before the conversion become the partners of the limited liability partnership

(b) Their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion.

3. The shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership.

4. The aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent at any time during the period of five years from the date of conversion.

5. The total sales, turnover or gross receipts in the business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees.

6. No amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion.

Requirements of LLP

1. At least one Partner should be resident.

2. Partners to LLP should be only shareholders of Company and no one else.

3.STEPS FOR CONVERSION:

Step 1: Pass a Board Resolution for conversion and authorising a Director to apply for conversion.

Step 2: File form No. 1 for application for name.

Attachments: Resolutions passed in step 1.

Then we will get a name approval certificate from ROC.

Step 3:  File incorporation documents in Form 2.

Attachments:

a. Proof of Address of Registered office of LLP.

b. Subscription sheet signed by the partners.

c. Consent of Partners

d. Detail of LLP(s) and/ or company(s) in which  designated partner is a director/ partner.

Step 4: File Form 18 “Application for conversion”

Attachments:

a. Statement of shareholders

b. Statement of assets and liabilities certified by auditor

c. Acknowledgement of latest IT return.

Then after approval of above forms, Registrar will issue a Certificate of Registration.

Step 5: make LLP agreement within 30 days of incorporation and file it in Form 3.

Step 6: Then ROC will issue Certificate of Incorporation. Give intimation to ROC within 15 days of Certificate of incorporation in Form 14. (attachment: Certificate of Incorporation)

By: CA Deepika