Conversion of Partnership to LLP

Limited Liability Partnerships offer legal protection to partners by distancing Personnel Assets of Partners from Business Liability. By making Partners into Shareholders yields other advantages - even growth in family income. Downsides are there but few. Let us explain to you, see how you stand and ease your path forward..

  • Examination
  • Structuring your Shareholding
  • Customised Solution for you
  • Incorporating your LLP

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Definition
PROCEDURE
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FAQ’S


The main consideration behind the Conversion of Partnership to LLP lies in the fact that by doing so it separates the personal liability of partners of the business from the liabilities of the business itself.

A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It is therefore a structure midway between partnership and corporation. In an LLP, one partner is not responsible or liable for another partner`s misconduct or negligence. It is also a safeguard against future business losses or litigation for damages.


It allows its members the flexibility of arranging their internal management on the basis of a mutually arrived agreement, just as in a partnership firm. Thus, it is suited to small and medium enterprises those in the services sector. They are quite popular internationally.

LLPs have to adhere to the provisions of the Limited Liability Partnership Act, 2008. Some of the main ones are:

  • The LLP is a body corporate and a legal entity separate from its partners. Two or more persons can form an LLP by associating for carrying on a lawful business with the aim of profit; by filling in and signing an Incorporation Document and filing the same with the Registrar, Limited Liability Partnership. The LLP will have perpetual succession.

  • Then the partners draw up an Agreement to define their mutual rights and duties of partners. The LLP Act 2008 is fairly flexible about its terms.

  • However, in addition to at least two (original) partners, the LLP must have at least two individuals as Designated Partners, of whom at least one must be an Indian resident in India. These DPs have duties and obligations (per law).

  • Protection:Thereafter, the LLP is treated as a separate legal entity. Unless the partners have committed any fraud, with respect to Tax, Creditors or other, they are liable only to the extent of the assets owned by the LLP. Such assets can be of tangible or intangible nature. The personal assets of individual partners are thus protected. No partner is liable for any independent or un-authorized action by other partners or their misconduct.

  • Accountability & Audit: The LLP is obliged to maintain annual accounts presenting a “true and fair view” of its state of affairs. A Statement of Accounts and Solvency shall be filed by every LLP with the Registrar every year. The accounts of LLPs shall also be audited, unless exempted by the Central Government.
    The Central Government has powers to investigate the affairs of an LLP, if required, by appointment of a competent Inspector for the purpose.

  • Compromise or arrangement such as merger and amalgamation of LLPs shall be in accordance with the provisions of the LLP Act 2008.

Frequently Asked Questions (FAQ)

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No! The Indian Partnership Act, 1932 shall not be applicable to Limited Liability Partnerships.

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Subject to there being at least TWO, there are no restrictions on the number of Partners. Even Companies can become Partners

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Subject to being sound of mind and solvent; None really! However, other Laws and Acts may come into play. For example it will be required for those running a pharmacy that at least one be a certified Pharmacist.

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Every LLP must have at least two Designated Partners and these have to be individuals of which one must be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLPs or nominees of such bodies corporate shall act as designated partners. Designated Partners are accountable for regulatory and legal compliance.

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Subject to the condition that at least one partner is a Resident of India, there are no restrictions on location or nationality of the others.

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Subject to concurrence of the partners (or in the event of death) the LLP can be wound by informing and obtaining permission of the Registrar. It may also be wound up otherwise by the intervention of a Tribunal per the provisos of the Companies Act, 1956. High Courts have powers should there be difficulty in establishing the Tribunal.

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