Eligibility Criteria for the Conversion of Private Limited to LLP

A Private Limited Company can convert to an LLP if:

• The company has no security interests in its assets at the time of application.
• All shareholders of the company will become partners in the LLP.

Documents for Conversion of Private Limited to LLP

To initiate the conversion of Private Limited to LLP, the following documents must be submitted:

1. Consent of Shareholders: A statement from each shareholder agreeing to the conversion.
2. Incorporation Document: Complete Form 2, which includes the incorporation details.
3. Application and Declaration: Submit Form 3 to declare the incorporation of the LLP.
4. No-Objection Certificate: Clearance from tax authorities.
5. Statement of Assets and Liabilities: A detailed list from the company.
6. Creditor List: A comprehensive list of creditors along with their consent for the conversion.
7. Regulatory Approvals: If necessary, obtain approval from relevant authorities in other countries.
8. Declaration Authorization: Authorization to make necessary declarations.
9. Optional Attachments: Any additional documents that may be relevant.

Step-by-Step Procedure for Conversion of Private Limited to LLP

1. Obtain Director Identification Number (DIN): Ensure all designated partners have a DIN if they do not already possess one.
2. Board Meeting: Conduct a board meeting to discuss and approve the conversion proposal, passing a resolution for the conversion.
3. Name Availability: Apply for the reservation of the LLP name and obtain the name approval certificate from the RoC.
4. Document Submission: Complete and file the required e-Forms with the RoC, attaching all necessary documents.
5. Filing for Conversion: Submit Form 18 along with the incorporation form to initiate the conversion process.
6. Receive Certificate of Incorporation: Once all requirements are met, the RoC will issue a Certificate of Incorporation for the LLP.
7. File E-Form 3: Within 30 days of conversion, file Form 3 detailing the LLP agreement among partners.
8. Finalize the Process: File the required documentation within 15 days after receiving the incorporation certificate to ensure all legal requirements are satisfied.

Note: After the conversion, the LLP must notify the Registrar of Companies (RoC) within 15 days using Form 14. Upon completion of the necessary formalities, the RoC will issue a Certificate of Registration. If the RoC denies the conversion, the company may appeal to the Tribunal

Tax Implications of Conversion

The conversion from a Private Limited Company to an LLP is generally not subject to capital gains tax, provided the following conditions are met:

• All assets and liabilities of the company are transferred to the LLP.
• All shareholders of the company become partners in the LLP.
• The ratio of capital and profit-sharing in the LLP mirrors that of the shareholding in the company.
• Shareholders do not receive any benefits other than through capital and profit-sharing ratios.
• The total sales or turnover in any of the three preceding financial years does not exceed ?60 lakhs.
• The total value of assets recorded in the company’s books in any of the past three years does not exceed ?5 crores.

Effects of Conversion

The conversion of a Private Limited Company into an LLP has several implications:

• The Private Limited Company is deemed dissolved.
• Its name will be removed from the RoC’s register.
• All assets, rights, liabilities, and obligations of the company transfer to the LLP.
• Existing liabilities and contracts remain unaffected.
• Active licenses and permits must be reapplied for, as they do not automatically transfer to the LLP.