In terms of Section 4 of the Partnership Act, 1932, Partnership refers to the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are individually called partners and collectively a firm and the name under which their business is carried on is called the firm name.
In terms of Section 2(1)(n) of the Limited Liability Partnership Act, 2008, Limited Liability Partnership (LLP) refers to a body corporate or partnership formed and incorporated under the provisions of the said Act.
Let’s understand the difference between Partnership Firms and Limited Liability Partnership:
|Limited Liability Partnership (LLP)
|Registration of a partnership firm is voluntary.
|Registration of an LLP is mandatory.
|Partners have unlimited liability they are personally liable for all the debts and obligations of the business.
|Liability of each partner is limited to the amount of money they have invested in the business.
|Limit of Maximum Number of Partners
|Maximum 50 persons can carry on any business as an association or partnership.
|No limit for maximum number of partners in LLP.
A Partnership firm may convert itself into a Limited Liability Partnership (LLP) by complying with the requirements set out in Schedule-II of Limited Liability Partnership Act, 2008.
- Section 55, Schedule-II of Limited Liability Partnership Act 2008
- Rule 18, 38 of Limited Liability Partnership Rules 2009
- Section 40, 60 of Indian Partnership Act, 1932
MANDATORY REQUIREMENTS (Paragraph 3 & 4 of Schedule-II):
- All the partners of the Partnership firm shall become the partners of Limited Liability Partnership (LLP)
- Obtain consent of all the partners in Form 9
- There must be at least 2 designated partners in Limited Liability Partnership (LLP) and at least one of them is a resident of India
- Every designated partner shall have a Designated Partner Identification Number (DPIN) and Digital Signature Certificate (DSC)
- Obtain consent of the creditors, if any for such conversion.
Obtain Digital Signature Certificate:
Submit an application for obtaining Digital Signature Certificate from any of the Certifying Authority in India along with the requisite fees of the respective Certifying Authority and the following documents:
- Aadhaar Card
- PAN Card
- Email address
- Mobile Number.
Name Reservation (Rule 18):
Note: The name of the LLP shall not be one prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950.
- Applicant firm shall apply for reservation of its name in Form RUN-LLP along with stipulated fee to the Registrar and choose “Conversion of Firm into LLP” option from dropdown list.
- A maximum of 06 names can be provided for name reservation for the proposed LLP.
- In case the name includes banking, insurance, venture capital, mutual fund, stock exchange, Chartered Accountant, Company Secretary, Cost Accountant, Advocate, etc. a copy of in-principle approval from such regulatory authority or council governing concerned profession should be attached with Form RUN LLP at the time of incorporation of such Limited Liability Partnership (LLP).
- Registrar may if satisfied reserve the name for a period of 3 months from the intimation date by Registrar.
Filing of Application for Registration (Paragraph 4 of Schedule-II & Rule 38):
After receipt of the approval on the proposed name of the Limited Liability Partnership (LLP), an application for conversion of Firm into LLP shall be filed Form -FiLLiP along with the following attachments and the fee as may be applicable:
- RUN – LLP form Service Request Number (SRN)
- Partnership Deed
- Approval of the owner of the registered trademark or the applicant of such trade mark for which application for registration is pending, if any
- Approval copy, where the proposed name contains any word(s) or expression(s) which requires approval from Central Government
- In-principle approval of regulatory authority, if required
- Approval copy from the competent authority in case of collaboration and connection with the foreign country or place
- Proof of Office address along with No-Objection Certificate, if applicable (Conveyance/ Lease deed/Rent Agreement along with rent receipts) along with copy of the utility bills (not older than two months)
- Copy of the proof of identity and proof of address of the Designated Partners
- Copy of resolution on the letterhead of the body corporate intending to become a partner in the proposed LLP and a copy of resolution/ authorization of such body corporate also on a letterhead mentioning the name and address of an individual nominated to act as nominee/designated partner on its behalf
- Consent from partner/ Designated Partner/ nominee/ nominee of the Limited Liability Partnership (LLP) to act in such capacity
- Statement of Assets and Liabilities of the firm duly certified as true and correct by the auditor
- List of all the secured creditors along with their consent to the conversion
- Copy of acknowledgement of latest income tax return.
- Individuals intending to be Designated Partner but does not have a DPIN, can make an application for allotment of DPIN in such Form FiLLiP. However, such DPIN allotment application can be made for only five individuals. In case, there are more than five partners willing to be Designated Partner in the LLP, then an application in Form DIR-3 can be filed for obtaining DPIN after such incorporation/ conversion.
- The applicant company shall have the option to make a name reservation application through Form FiLLiP itself.
- The user has an option to file Form 9 as a pdf attachment to Form FiLLiP in cases where the Designated Partners do not have DPIN or for the ones who have applied for DPIN through FiLLiP. For other Designated Partners having DPIN, the user will have an option to file Form 9 via linked filing to Form FiLLiP.
- The Ministry of Corporate Affairs (MCA) vide the Limited Liability Partnership (Second Amendment) Rules, 2018 dated: 18.09.2018 has notified that Form 18 for the purposes of conversion of unlisted public company in to LLP is now a webform and shall be filed along with Form FiLLiP (Incorporation form) with the Central Registration Centre (CRC).
- The Partnership Firm intending for converting itself into a Limited Liability Partnership (LLP), may be dissolved with the consent of all the partners or in accordance with a contract between the partners.
Certificate from Registrar (Paragraph 5 of Schedule-II & Rule 38):
After verification of the application and documents so furnished, the Registrar shall register such documents and issue a certificate of registration in Form 19 to the respective Limited Liability Partnership (LLP).
Inform the Concerned Registrar of Firms about Conversion of Firm (Proviso of Paragraph 5 of Schedule-II & Rule 38(3)):
The Limited Liability Partnership (LLP) shall file an intimation about such conversion to the Registrar of Firms in Form-14 along with the below-stated attachments, within fifteen days from the date of its registration:
- Copy of Certificate of Incorporation of LLP
- Copy of Incorporation documents submitted
- Any other documents, if required.
Filing of LLP agreement (Form-3):
The Limited Liability Partnership (LLP) shall file Form 3 in respect of the LLP Agreement so executed, with the Registrar within 30 days from the date of such conversion along with the stipulated fee and the following documents:
- Initial LLP agreement or Supplementary/ amended LLP agreement containing changes
- Any other information as is necessary.
Post Conversion Compliances (Paragraph 7 & 9 of Schedule-II):
- Limited Liability Partnership (LLP) shall have a bank account opened in its name for the purposes of routine business transactions.
- Limited Liability Partnership shall also apply for obtaining registrations under the Goods and Services Tax Act, Micro, Small, and Medium Enterprises Act and other registrations as may be applicable to their business or file conversion intimation to other authorities Goods and Services Act, EPF, ESI, Other Specific Laws, as the case may be.
- All tangible (movable and immovable) property as well as intangible property vested in the firm, all assets, interests, rights, privileges, liabilities, obligations relating to the firm and the whole of the undertaking of the firm shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed.