Several businesses in India that initially started as Limited Liability Partnerships (LLPs) may now wish to convert into Private Limited Companies to achieve greater business growth or to infuse equity capital. An LLP can be converted into a Private Limited Company as per the provisions contained in Section 366 of the Companies Act, 2013, and the Companies (Authorized to Register) Rules, 2014.

However, there are several requirements that must be fulfilled before converting an LLP into a Private Limited Company. The LLP should have complied with all statutory compliance obligations. Additionally, the conversion must be published in at least two newspapers—one in a vernacular language and the other in English. A No Objection Certificate (NOC) from the Registrar is also required.

Filing of Form No. URC–1 is mandatory for the conversion

Advantages of Conversion

1. Separation Between Ownership and Management: In a Private Limited Company, a clear distinction exists between ownership and management. This ensures that a professional team with diverse skill sets manages the company’s operations effectively.

2. Raising Capital: It is more convenient and easier for companies, compared to LLPs, to raise investments from investors.

3. Preservation of Goodwill: Converting from an LLP to a Private Limited Company helps retain the established brand name and goodwill of the business.

4. Lower Taxation: Companies benefit from a lower income tax rate of 25%, whereas LLPs are taxed at a flat rate of 30%.

5. Tax Benefits: The conversion from an LLP to a company is exempt from capital gains tax. It also allows for the carryforward of unabsorbed depreciation and losses.

Documents Required for Conversion

1. Certificate of Registration of the LLP
2. LLP Agreement
3. Statement of Assets and Liabilities certified by a Chartered Accountant
4. Copy of the LLP’s Income Tax Return
5. List of partners along with their detailed particulars
6. Declaration by directors confirming the particulars of all partners
7. Affidavit from all partners for dissolution of the LLP
8. Newspaper Advertisement
9. Newspaper Advertisement (Form URC-2)
10. NOC from all Creditors
11. NOC from the ROC where the LLP is registered

 

Step-Wise Process to Convert LLP into a Private Limited Company

1. Consent of All Partners of the LLP:
The process begins with a meeting of all partners to obtain unanimous consent for the proposed conversion in accordance with Section 366 of the Companies Act, 2013. During the meeting, at least two partners must be authorized to sign and execute the necessary documents for conversion.

2. Newspaper Publication:
A public notice announcing the intention to convert the LLP into a company must be published in two newspapers—one in a vernacular language and one in English—circulating in the district where the LLP is located. This notice must be published at least 21 clear days before the filing of Form URC-1.

3. NOC from ROC and Creditors:
A No Objection Certificate must be obtained from the ROC where the LLP is registered. Additionally, all creditors must provide their unconditional NOC. If there are no liabilities, a declaration signed by the partners stating the same must be submitted.

4. Apply for Name Reservation Using RUN:
The company name must be reserved through the RUN (Reserve Unique Name) web form on the MCA portal. The name should be similar to the LLP name, substituting “LLP” with “Private Limited.”

5. Filing of URC-1, MOA, AOA, DIR-2, and SPICe+ Forms:
Within 30 days of name reservation, the application for conversion must be filed using Form URC-1, SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus), e-MOA, e-AOA, and DIR-2 along with the necessary documents. Once approved, the ROC will issue a new Certificate of Incorporation in the name of the Private Limited Company.