Conversion of a company into an LLP involves quite a lengthy procedure mainly because it is very beneficial. LLP provides immense freedom to the partners in the company to decide norms according to their wishes.
In a nutshell, LLP provides the best features to the partners when it comes to private businesses. All the best features of the various types of business are accumulated in ab LLP which makes it one of the most preferred business types for professionals. Especially the small-scale businesses can extract optimum benefit by converting their company into LLP.
Converting your company into LLP is desirable for a variety of reasons. For one, the capital gain tax will not be levied on the conversion process as per the Financial Bill of 2010.
The requirements involved with converting a company into LLP are also noteworthy to ensure that you go about the process with ease. These requirements are a necessity if you are to go about the process without any hiccoughs.
Firstly, every member of the company has to agree to the conversion of the company into an LLP. Once they’re all on the same page, all the members will become partners in the LLP.
Furthermore, with the ROC, a copy of the income tax return of the company has to be filed. Moreover, apart from the members, the mentioned creditors of the company will also have to agree with the conversion. For the procedure to be followed smoothly, no prosecution should be initiated against the company.
To begin with the procedure, all the designated members of the company will have to obtain a DIN and those who already have one need to file theirs’. The minimum number of partners is two and at least one of them have to be certified citizens of the country. Before filing the DIN, it is necessary for all the designated partners to file for the DSC.
A meeting of the board of directors need to be called, wherein the resolution has to be successfully passed in the favor of the conversion. Another resolution naming the director of the company needs to be passed in agreement with the majority of the designated members.
The next step is the filing of Form 1 which is to be filed with the new name of the LLP (if the name is changed). Also, it should contain the name and address of the designated partners along with the proposed business activity and the importance of the LLP name chosen by the partners.
Once done with the filling of Form 1, the members need to come to an agreement and draft it with all the mutual rights and conditions. This agreement will contain the name and address of the partners, their contribution to the share, rules for governing the LLP, and the rights and duties of all the concerned partners.
Form 2 will again contain the basic information about the LLP which includes its address, contribution of the partners. In a nutshell, it will contain the basic information regarding the LLP same as in form 1.
This form will contain all the previous information along with additional information about the conversion process. For instance, it will be a background check on the past of the company and if all the members have readily agreed to the conversion.
This form will be filled with all the details of the conversion agreement signed by the designated partners.
Once all the above-mentioned prerequisites are taken care of, the newly formed LLP can obtain its certificate of incorporation. It will be followed by the filling of form 14 with the registrar of companies.
The documents required for the conversion are many and different documents are to be filed with the different forms filled during the process.
Most importantly, it will require the identity and address proof of all the members along with their agreement for conversion. Photographs (passport-sized) of all the designated members also have to be filed during the process. A copy of the income tax return of the company and the signed agreement of the conversion is a must.