What is the conversion process for a Partnership into an LLP?
In recent years, many firms have shifted from conventional partnerships to Limited Liability Partnerships (LLPs) thanks to increased flexibility and other advantages. The major driver is the limited liability protection LLPs provide to partners while keeping operational agility. By combining elements of both partnerships and private companies, LLPs reduce personal exposure of partners and are highly suitable for SMEs. The LLP route generally offers a smoother compliance experience than a traditional partnership.
Why Opt for LLP Rather Than a Partnership Firm?
- Perpetual Succession: Unlike a partnership, dissolution/death of a partner does not affect continuity of an LLP.
- Multidisciplinary Collaboration: LLPs make it easier for professionals from various disciplines to collaborate within one structure.
- Investment Allure: LLPs have better acceptance among foreign investors and VC funds due to a clear corporate-like framework.
- Freedom of Management/Flexibility: Partners enjoy more freedom in operations; the LLP Act, 2008 allows flexibility through the LLP Agreement.
Partnership Firms vs. LLPs
Key differences between a traditional partnership and an LLP:
| Basis | Partnership | LLP |
|---|---|---|
| Liability | Unlimited — partners’ personal assets are fully liable for firm debts/obligations. | Limited to the extent of partners’ agreed contribution to the LLP. |
| Separate Legal Entity | No | Yes |
| Number of Members | Max 20 (10 for banking partnerships). | No statutory upper limit on number of partners. |
| Digital Signature Certificate (DSC) | Not required. | Mandatory for designated partners for e-filing. |
| Books of Accounts | Not mandatory. | LLP Agreement and accounts maintained per LLP Act. |
Requirements for Converting a Partnership Firm to an LLP
- Follow Section 55 of the Limited Liability Partnership Act, 2008 read with Second Schedule.
- All partners of the firm become partners of the LLP on conversion; no new/exiting partners during the application process.
- Valid Digital Signature Certificate (DSC) is mandatory; at least two partners must have a DIN/DPIN before applying.
- Obtain written consent/NOC from all existing partners prior to conversion.
- The partnership firm must be duly registered under the Partnership Act, 1932.
- DIN/DPIN must be procured for all Designated Partners proposed in the LLP.
- Initially, the LLP should have the same partners as the original partnership (withdrawals can be done post-conversion).
FAQ’s for Convert Partnership Firm to LLP
In converting a partnership firm into an LLP, what are the key steps?
- Secure digital signatures (DSC) for all partners.
- Apply for DIN/DPIN for each designated partner.
- Submit RUN-LLP form on the MCA portal to reserve name.
- File FiLLiP (incorporation) with required attachments for conversion.
- Execute and file the LLP Agreement on the MCA website.
- Obtain the Certificate of Incorporation of the LLP.
Is it possible for just registered partnership firms to become LLPs?
Yes. Only firms registered under the Partnership Act, 1932 are eligible to convert under the LLP Act.
Which form is required in India to create a Foreign Limited Liability Partnership?
Use the prescribed MCA forms for foreign LLPs as applicable (RUN-LLP for name reservation and FiLLiP for incorporation, with foreign partner details).
Is an LLP required to file any kind of Annual Return?
Yes. Form 11 (Annual Return) and Form 8 (Statement of Account & Solvency) along with income-tax return annually.
What distinguishes a designated partner from a partner?
Designated partners (minimum two) are responsible for regulatory/filing compliance and must hold DIN/DPIN; other partners have no such statutory duty.
What is the primary benefit of being an LLP instead of a partnership firm?
Limited liability and separate legal entity status while retaining operational flexibility via the LLP Agreement.
What effects result from converting a partnership firm to an LLP?
Assets, liabilities, contracts and proceedings of the firm vest in the LLP; partners become partners of the LLP and the firm stands converted.
What are the costs involved in changing a partnership business into an LLP?
Government filing fees (RUN-LLP, FiLLiP, LLP Agreement stamping as per state), professional fees, and incidental costs for DSCs/DINs.
