Investment in a LLp

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A discussion on how to structure a £1 crore investment for a 25% stake in a Limited Liability Partnership (LLP). The proposal involves adjusting the capital accounts and creating goodwill to reflect the new partner's contribution. The conversation also touches upon potential IT implications and considerations for future conversion to a limited company.

Ram

Ram (Querist)

31 August 2021 There is a offer of 25% stake in a LLP for Rs. 1 cr for a new partner. The present capital is Rs.10.00 lakhs held by 2 techie founders say 50% - 50% . How to take the investment and structure the stake ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

31 August 2021 Create Goodwill for 2.90 crore by crediting capital account and debiting Goodwill account.
After receipt of 1 crore for 25% stake total capital will be 4 crore. Stake will be proportional now.

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Ram

Ram (Querist)

31 August 2021 Sir, Thanks your answer was good. Just a Follow up question. (1) Will there be a IT issue on the GW account and the credits to the existing partners. (2) When we convert this LLP into a Ltd for reverse merger in the next few years will this shares have to be declared as Shares issued in consideration other than cash ?. Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

31 August 2021 1 No IT issue till capital taken out in excess of investment.
2 yes, you are right.

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Ram

Ram (Querist)

31 August 2021 thanks for the prompt answer sir

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