How Do You Convert a Partnership Into an LLP?

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.