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Converting A Company Into A LLP

CA Gaurav Mittal 
on 26 May 2014

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YOUR KNOW HOW ON HOW TO CONVERT A COMPANY INTO A LLP

With the mammoth number of provisions, penalties, statutory compliances and various restrictions imposed on the Private Limited Companies it is now advisable to form a LLP instead of a company and to convert your existing company into a LLP.

BENEFITS OF CONVERTING INTO LLP

1. LLPs give much more flexibility to its members to organize the internal structures of their business as compared to a Pvt Ltd Co.

2. Unlike Private Limited Companies where the shareholders are limited to 200, there is no upper limit for the partners in an LLP. The only prerequisite is that there should be minimum 2 partners and at least 2 individuals as Designated Partners, of whom at least one shall be resident of India.

3. On conversion, there is an immediate transfer of all the assets and liabilities of the company and there is no instrument of transfer required or stamp duty to be paid when movable and immovable properties of the company become the properties of LLP.

4. There is no capital gain tax charged on transferring the properties from Public Limited Companies to LLPs. Moreover an LLP is not subject to Dividend Distribution Tax that is levied on companies and therefore an LLP has to pay tax at a lower rate.

5. When a Pvt Ltd Co is transformed into an LLP the accumulated loss of the company becomes the loss of the LLP for the previous year in which the conversion took place which makes the whole process much simpler.

6. The funds can be brought and utilized in any manner as the partners so desire setting aside the stringent conditions imposed by the Companies Act 2013.

ELIGIBILITY

1.There is no security interest in its assets subsisting or in force at the time of application.

2. The partners of the limited liability partnership to which it converts comprise all the shareholders of the company and no one else.

REQUIREMENT

1. All shareholders to give consent.

2. All shareholders to become partners and no one else.

3. Upto date filing of Income Tax returns and Annual Returns with ROC. Latest ITR copy to be filed.

4. No prosecution initiated against or show cause notice for alleged offences under Companies Act.

5. Confirmation from all unsecured creditors.

PROCESS

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CA Gaurav Mittal

mittalgaurav05@gmail.com


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