LLP Conversion
Conversion to LLP
Limited Liability Partnerships (LLP) are emerging ever since the introduction of the Companies Act, 2013 as it is a form of business entity, which allows individual partners to be free from the concept of joint liability of partners in a partnership firm. LLPs are preferred form of business as it is an alternative corporate business vehicle that provides the benefits of limited liability of a company and allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
A registered limited company in India (Private or Public) has a lot of complex formalities and incurs additional overheads for managing affairs including mandatory board meeting, maintenance of statutory records, filling of e-forms with MCA etc. Absence of such mandates for LLP combined with advantages such as non-applicability of dividend distribution tax on profit repatriation, transfer of profit rules and deemed dividend profit issues, MAT provisions and many more.
Overview
LLPs involve the best practices of private companies and also protect the freedom of partners, giving them the ability to decide the norms of the company. In a nutshell, it combines the best features of various kinds of businesses.
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FAQ
Frequently asked questions.
An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules, 2014.
The LLP Act contains enabling provisions pursuant to which a firm (set up under Indian Partnership Act, 1932) and private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs.
LLP Disadvantages
In case an LLP fails to file Form 8 or Form 11 (LLP Annual Filing), a penalty of Rs. 100 per day, per form is applicable. There is no cap on the penalty and it could run into lakhs if an LLP has not filed its annual return for a few years.
LLPs combine the operational advantages of a Company as well as the flexibility of Partnership Firms. The fee for incorporation of an LLP firm is very nominal as compared to that for Private Limited Company. The compliance requirements for an LLP are significantly lower than those for a private limited company.
