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Withdrawal of Capital from LLP (Which converted from Pvt Ltd)

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Abhay salunkhe

86 Points Posted on 07 August 2023

Hello

I just converted my pvt ltd company to LLP, can i withdraw reserves from my LLP.

I read it somewhere that, i have to wait 3 years to withdraw the reserves from it.

Kindly help me to get clear vision. Is really there any section which prohibits withdrawal for 3 years?

Replies (2)

Quick Summary

After converting a private limited company to an LLP, you generally need to wait three years before withdrawing accumulated profits or reserves from the original company. Failing to do so can result in the withdrawal of capital gains tax exemptions and make those gains taxable. However, withdrawing your initial capital contribution or profits earned by the LLP after conversion is permitted.

sabyasachi mukherjee

Profession

19978 Points Posted on 08 August 2023

Withdrawal of capital from limited liability partnership firm

Aashok Kumar Sharma

Finance/Compliance Consultant

77884 Points Posted on 07 November 2026

Wait 3 years, or lose the exemption:

• Sec 47(xiiib) exempts capital gains on conversion of a private company into an LLP, if conditions are met. One condition (proviso (f)): no amount is paid, directly or indirectly, to any partner out of the balance of accumulated profits standing in the company's books on the date of conversion, for 3 years from conversion.

• If you withdraw the company's reserves (accumulated profits) within 3 years, the exemption is withdrawn (Sec 47A(4)). The capital gains (and the 72A loss carry-forward benefits) become taxable in the LLP's hands in the year of breach.

• Withdrawing your own capital (equivalent to share capital converted) or new profits earned by the LLP after conversion isn't restricted.

• Also: partners' profit share must be at least 50% for 5 years, and the company's turnover must not have exceeded Rs 60 lakh (and total assets Rs 5 crore) in the 3 years before conversion.