Conversion of Partnership Firm into LLP

Conversion of Partnership Firm into LLP:

An existing partnership firm can be converted into LLP by complying with the provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.

LLP Agreement:

It is mandatory to execute and file LLP Agreement in view of Section 2(0) & (q) , 22 and 23 of the Act.

As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.

Steps in converting a Partnership Firm into LLP:

  1. To convert the Partnership Firm into an LLP, then the  Digital Signature Certificate (DSC) is a mandatory requirement for all the Partners.
  2. The Partners in an LLP require a DIN / DPIN. A DIN is a unique number which is given to each partner or a director of an LLP.
  3. Once, two DIN/DPIN are available, an application for name reservation of the prospective LLP can be made to the Ministry of Corporate Affairs. The Reservation of the name of the LLP must be obtained before filing the forms for conversion of the Partnership Firm into LLP.
  4. Application and a  Statement of the Conversion of Partnership Firm into LLP (Limited Liability Partnership) i.e., Form 17  should be filed along with the incorporation application. The subscriber’s sheet should also be filed while converting a partnership firm into an LLP and attach the following required documents to the form:
  •  A Statement of consent of partners of the firm;
  • A Statement of the assets and liabilities of the firm which is duly certified as a  true copy by a practicing Chartered Accountant;
  • Copy of the acknowledgment of the latest Income Tax Return (ITR);
  • Approval from any regulatory body/ authority;
  • Prepare a list of all the secured creditors along with their consent to the conversion; and
  • Clearance or No Objection Certificate (NOC) from the Tax Authorities.

The LLP Form 17 shall be digitally signed by a practicing practicing Chartered Accountant/Cost Accountant/Company Secretary.

5. For the conversion of a Partnership Firm into LLP, LLP Form 2 and LLP Form 3 must also be filed. LLP Form 2 contains the                                 incorporation document and the subscriber’s statement along with the following attached documents:

  • Proof of address of the registered office of the LLP;
  • The Subscribers’ sheet with consent;
  • An approval of the regulatory authority, if required;
  • The Details of LLP(s) and/ or company(s) in which the partner/ designated partner is a director/ partner (if any).

The LLP Form 3 contains the initial Limited Liability Partnership Agreement. This form can be filed once the Partnership Firm is converted into an LLP or while filing for the conversion of the Partnership Firm into LLP. The LLP Agreement must be attached with the LLP Form 3.

  • On conversion of Partnership Firm into LLP, the Registrar would then issue a Certificate of Incorporation of LLP and all the properties, assets, interests, rights, privileges, etc. of the firm are now transferred to the LLP. In other words, the complete undertaking of the firm is transferred to the LLP.
  • However, any approvals/permit/license that is issued under any law to the Partnership Firm will not be automatically transferred to the Limited Liability Partnership. Therefore, fresh licenses or any registrations may be required.