conversion-of-a-private-limited-company-into.js
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import PageBanner from "@/components/reuseables/PageBanner";
import Image from "next/image";
import Link from "next/link";
import React from "react";
const banners = [
{
imageSrc: "/images/banner/blog.webp",
pageTitle: "Conversion of a Private Limited Company into LLP",
homePageUrl: "/blog",
homePageText: "Blog",
activePageText: "Conversion of a Private Limited Company into LLP",
},
];
const Conversionblog = () => {
return (
<>
<PageBanner banners={banners} />
<div className="blog-details-area ptb-100">
<div className="container">
<div className="row">
<div className="col-lg-12 col-md-12">
<div className="blog-details-desc">
<div className="article-image">
<Image
src="/images/blog/blog4/3.jpeg"
layout="fill"
alt="image"
className="image-fluid image"
/>
</div>
<div className="article-content">
<div className="entry-meta">
<ul>
<li>
<i className="ri-shield-user-line"></i>
<p> By Advith Consulting</p>
</li>
<li>
<i className="ri-calendar-2-line"></i>
<p>Nov 20, 2024</p>
</li>
</ul>
</div>
<h3>Introduction</h3>
<p>
The Limited Liability Partnership (LLP) structure has gained
immense popularity in the corporate sector in recent times.
Since the enactment of the Limited Liability Partnership
Act, 2008 by the Parliament of India, various business
entities in the country, especially the small and
medium-scale business enterprises, have opted for conversion
of their Private Limited companies into LLPs so that they
can have access to the various benefits that can be availed
under this structure. Pre-dominantly the benefits revolve
around limited liabilities for the Partners, reduced
compliances and ease of movement of capital & profits.
<br /> <br />
But this whole process of transition involves a lot of
complex procedures. Therefore, it's crucial for the entities
to understand various steps involved in the process and the
benefits, challenges and other impacts of the intended
conversion before venturing into the intricacies of it. Let
us try to have a fair understanding of the concept of an LLP
and the whole process involved while converting a private
limited company into an LLP, along with its possible
implications and the key points to be taken into
consideration during the entire transition process.
</p>
<h6 className="blog-pointer">What is an LLP?</h6>
<p>
A Limited Liability Partnership (LLP), as defined under the
provisions of the Limited Liability Partnership Act, 2008,
is a composite structure for businesses that combines the
advantages of a company and the flexibility of a
partnership. The LLP structure is altogether a separate
legal entity that provides limited liability protection to
its partners, ensuring that they are responsible only for
their agreed contribution in the LLP while the LLP itself
bears full liability for its assets and obligations. As a
separate legal entity, an LLP can enter into contracts and
may own properties in its own name, and its existence
remains unaffected by any changes in the partnership. Most
importantly, the partners in an LLP are protected from any
joint liability that may arise due to an unauthorised or
wrongful action of another partner in the concerned LLP. The
mutual rights and duties within an LLP are dictated by an
agreement among the partners of the LLP or between the LLP
and its partners, thus clubbing the features of both
corporate structures and partnership firm structures.
</p>
<h6 className="blog-pointer">
Key Considerations for a Company before initiating the
process of converting it into an LLP
</h6>
<p>
There are several criteria for a company that need to be met
by an entity before initiating the process of its transition
into an LLP. A Private Limited Company can be converted into
an LLP in compliance with the provisions specified in the
Section 56, 58 and the Third schedule of Limited Liability
Partnership Act, 2008.
</p>
<h6 className="blog-pointer">
Pre-Requisites for a Private Limited Company for Conversion
into an LLP:
</h6>
<Image
src="/images/blog/blog4/5.jpeg"
alt="reporting"
fill
className="img-fluid image mb-3 mt-2"
/>
<h6 className="blog-pointer">
The Required Steps for Conversion of a Company into an LLP
</h6>
<p>
Let us go through the steps for the process of converting of
a company into an LLP in detail.
</p>
<h6 className="blog-pointer">
Board and Shareholder Resolution
</h6>
<p>
The first step that a company has to initiate in the process
of transition is to call for a board meeting and take
approval of the board on the following things:
</p>
<ul>
<li>Conversion of the Company into LLP</li>
<li>Authorise the Directors for Filing</li>
<li>
Convene an Extraordinary General Meeting to take approval
of the shareholders.
</li>
</ul>
<p>
Once the board resolution is passed, an Extraordinary
General Meeting is to be organised and consent from all the
shareholders for the intended conversion of it into an LLP
must be obtained.
</p>
<h6 className="blog-pointer">
Application for Name Approval
</h6>
<p>
File Form LLP-RUN (Reserve Unique Name) to get approval for
the LLP name with the following details and attachments:
</p>
<Image
src="/images/blog/blog4/2.jpeg"
alt="reporting"
fill
className="img-fluid image mb-3 mt-2"
/>
<h6 className="blog-pointer">
Filing of application for conversion
</h6>
<p>
Company must file the Form 18 along with Form FiLLiP and
following attachment:
</p>
<Image
src="/images/blog/blog4/4.jpeg"
alt="reporting"
fill
className="img-fluid image mb-3 mt-2"
/>
<h6 className="blog-pointer">
Issuance of Certificate of Registration
</h6>
<p>
Once the conversion form is approved by authority, a
Certificate of Registration will be issued, confirming the
conversion of the company into an LLP.
</p>
<h6 className="blog-pointer">
Effect of Conversion of a Private Limited Company into an
LLP
</h6>
<p>
On and from the date of conversion of the erstwhile company
into an LLP as specified in the COI, an LLP comes into
existence and all the tangible (movable or immovable) and
intangible property vested with the Company, all the assets,
interest, rights, privileges, liabilities and obligations
relating to the Company and the whole of the undertaking of
the Company shall be transferred to and shall vest in the
LLP without further assurance, act, or deed, and the Company
shall be deemed to be dissolved and removed from the records
of the registrar of the Companies.
</p>
<h6 className="blog-pointer">
Notice of Conversion into LLP
</h6>
<p>
The LLP should intimate and update about the conversion of
the company into an LLP in various departments like IT, GST,
PF, ESIC, etc. The LLP shall include the following (for a
period of 12 months) in its every correspondence, i.e.,
bills, letterheads, emails and all other communications: a.
a statement that it was, as from the date of registration,
converted from a company into an LLP; and b. the name and
registration number of the company from which it was
converted.
</p>
<h6 className="blog-pointer">
Advantages of Converting a Company into an LLP
</h6>
<Image
src="/images/blog/blog4/1.jpeg"
alt="reporting"
fill
className="img-fluid image mb-3 mt-2"
/>
<h6 className="blog-pointer">
Challenges and Limitations of an LLP
</h6>
<p>
Like every other business structure, Limited Liability
Partnership too has its own pros and cons. As we already
have listed the benefits that can be availed under the LLP
structure, let us now delve into the challenges and the
disadvantages that the system has got.
</p>
<Image
src="/images/blog/blog4/6.jpeg"
alt="reporting"
fill
className="img-fluid image mb-3 mt-2"
/>
<h6 className="blog-pointer">Conclusion</h6>
<p>
As is evident from the discussions above, the decision to
convert a private limited company into an LLP should be made
after considering all the pros and cons and considering the
long-term business strategy of the organisation. Since
benefits such as reduced compliance and tax advantages are
also accompanied by limitations like constraints in
fundraising and adverse investor perceptions in certain
cases; it is crucial to consider all these factors before
reaching the decision to go through the process of
transition. It is essential for the businesses to consult
their legal and financial advisors to ensure a smooth
transition process, which would enable the businesses to
achieve their aimed objective of fostering growth,
flexibility and strategic advantages in the increasingly
competitive business landscape.
</p>
<br />
<h6 className="blog-pointer">Contributors</h6>
<p>Kuldeep Sarma – Content Strategist <a className="blog-pointer" href=" https://www.linkedin.com/in/kuldeep-sarma-00788a122/ ">linkedin</a><br/>
Nikita Mittal – Manager- Corporate Secretarial Services <a className="blog-pointer" href="https://www.linkedin.com/in/csnikitamittal?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=android_app">linkedin</a> <br/>
Poonam Vernekar-Deputy Manager - Content & Marketing <a className="blog-pointer" href="https://www.linkedin.com/in/poonam-vernekar?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=android_app">linkedin</a>
</p>
<div className="article-footer">
<div className="article-tags">
<Link href="/blog">Consulting</Link>
<Link href="/blog">Business</Link>
<Link href="/blog">Market</Link>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</>
);
};
export default Conversionblog;