A Limited Liability Partnership (LLP) is a Corporate unit that governs a business and allows for great potential for improvement, unlike a partnership that depends on its members will to control the lawful entity. Partnerships do not have a limit on the number of partners. These are some characteristics of an LLP.
- Partnerships will benefit from the value and credibility provided by LLPs
- To expand, they are eligible for new capital
- In LLPs, experts from different domains work together to achieve objectives
- LLPs are capable of combining with other LLPs through mergers, joint ventures, etc, as opposed to a partnership’s inability to affiliate with another company.
Conversion of Partnership to LLP – Requirements
The following requirements must be met in order for your partnership to become an LLP
- Be sure that all of your income tax returns are current
- A unanimous vote of all unsecured creditors is required for the proposed modification
- There should be two designated members present
- Among the designated partners, at least one must be Indian
- The percentage of capital is not clearly defined, but all partners of the company should be invested in some way
- The liability of the partners is limited to the amount of equity contributed
- Firm partners are not restricted in the amount of capital allotted to the firm
- The flexibility of the organization of the company is detailed
- An LLP Company should be operated according to the terms and conditions of the LLP Agreement.
An Overview of the Conversion from Partnership to LLP
Section-55 of LLP Act, 2008, along with schedule II, stipulates how a company can upgrade into an LLP. Partners in partnership companies are at a disadvantage since they don’t have limited liability protection, reducing the significance of the legal entity, its capacity to embrace an endless number of members, and ease of ownership transfer. As of 2008, the Limited Liability Partnership Act has made LLPs the exclusive unit for small and medium-sized companies.
The eligibility for a partnership to be converted into an LLP
- A partnership that is converted into an LLP must have the same number of partners as the original partnership
- It must not have any newer or fewer partners than the partnership
- The first thing you must do is convert your partnership to an LLP, then add your new partner to the LLP you just formed
- If, however, you want to remove a partner, then our experts recommend that you do so before the partnership is converted into an LLP.
The benchmarks for converting a partnership firm into an LLP
- It is possible or unlikely that a company will be registered with a company registration authority
- Partners must consciously agree to the LLP
- Partners become LLP partners in proportion to their capital investment at the time of conversion
- Partners must contribute to the LLP
- A Director Identification Number (DIN) must be obtained for each of the specified partners
- The Digital Signature Certificate (DSC) must be obtained for at least one designated partner.
Which is Better, an LLP or a Partnership?
- The number of partners in an LLP is unlimited
- Partners can only lose up to the amount of capital they have invested in the company
- The minimum investment amount is unlimited
- As compared to partnerships, LLPs are regarded as safer and of higher value
- An LLP is the best option for the firm looking to obtain more funding. LLPs enhance creditworthiness.
- An authorized multidisciplinary LLP brings together experts from various fields of study
- Also, CA firms are now able to reintroduce themselves into LLP and improve their order of systems
- PE funds, joint ventures, and venture capital funds benefit from LLP configuration, which isn’t possible for partnerships
- Another advantage of an LLP is that it allows for the merger and acquisition of other companies, whereas this is not possible in a partnership.
What Vakilsearch Can Do for You in LLP Registration
Vakilsearch experts suggest that you form an LLP rather than a partnership because an LLP offers the same benefits as a private limited company while also providing the framework of a partnership company. You can reach out to our experts and they will assist in the registration of your LLP with the Ministry of Corporate Affairs (MCA). In addition, our experts can assist in selecting the right company name and drafting the documents necessary for the company registration. Feel free to contact us.