1. Demystifying LLP Conversion
Presented by:-
CA. Ravi Kr. Patwa
B.Com, FCA, DISA(ICAI)
RKP ASSOCIATES
Chartered Accountants
‘Sarwam’, 1st Floor
Janiganj Bazar
Silchar
Branches at Guwahati, Kolkata, Siliguri, Patna
Associate offices at New Delhi, Mumbai, Bangalore, Chennai, Hydrabad, Ahmedabad, Jaipur, Trivandram, Cochin, Pune etc.
Member Firm of Batgach  & Affiliates, a Network approved by ICAI.

2. Discussion on LLP Conversion
What can be Converted?
Advantages over Company
Advantages over Firm
Demerits
Check Points
Procedure
Tax Issues
Some Questions

3. What can Be Converted ? Partnership Firm Private Company
Unlisted Public Company

4. Advantages over Company
Lower Cost of Compliance
No restriction on withdrawal from Capital
No need of maintaining Statutory Registers
No Compulsory Meetings
No cap on loans and borrowings
No condition applicable on acceptance of deposits
Cont’d…

5. Advantages over Company ....... (Cont’d…)
No restriction on related party transactions
Audit is not compulsory
No restriction on remuneration
No restriction on distribution of Profits
No dividend Distribution Tax

6. Advantages over Firm Perpetual Succession
Limited Liability of partners
Partners are agents of LLP & not of other partners
Can initiate legal proceedings with own name

7. Some Demerits Some Private Companies can not be converted
NBFC activity can not be carried out
Larger LLPs require CS signature in Annual Return
Section 8/25 Company can not be converted

8. Check Points before Conversion
LLP should comprise of all the shareholders/partners of the Company/Firm as partners & none else
Capital contribution & Profit sharing ratio in the LLP should be in the same proportion as their shareholding in the Company/Profit sharing ratio of Firm
All the Assets & Liabilities of the Company/Firm must become Assets & Liabilities of the LLP
Obtain no objection from creditors
Obtain Clearance from any other Authority/Body Corporate, if needed
Balance Sheet of a cut off date has to be drawn & Audited
If a Body Corporate is a likely partner, appoint a nominee for it

9. Check Points before Conversion
(Only for Companies)
The assets should not have been given as security
Turnover or gross receipts in any of the 3 preceeding years preceeding the year of conversion shall not exceed 60 lakhs
Assets shall not exceed 5 crores in last 3 years
Shareholders of the Company shall not receive anything except the Capital Contribution & right to profits in the LLP
Aggregate profit sharing ratio of such Shareholders shall not fall below 50% in the next 5 financial years
No amount can be paid to any partner out of accumulated profits standing in the accounts of the company as the date of conversion for a period of 3 years

10. Procedure of Conversion
Obtain DIN of designated partners
Obtain DSC of at least one designated Partner
Call Board meeting, pass resolution for conversion & authorize one director to apply for name of LLP
Apply for name availability in form Form-1
Obtain name approval
Draft LLP agreement
Cont’d…

11. Procedure of Conversion ....... (Cont’d…)
File incorporation documents & subscribers statement in Form 2
File application & statement for conversion in Form 18 / Form 17
File Form 3 containing LLP agreement within 30 days
Obtain certificate of registration in Form No. 19
Cont’d…

12. Procedure of Conversion ....... (Cont’d…)
File intimation of conversion in Form 14 within 15 days of Registration
File consent of Designated Partners in Form 4 within 30 days
For a period of 12 months commencing not later than 14 days after the date of conversion, every official correspondence of the LLP should bear -
a statement that it was converted from Company/Firm to LLP from such date
name and registration no. of the Company/Firm
Cont’d…

13. Certain Tax Issues
No Capital Gains tax on conversion if conditions are fulfilled
Carry forward of Unabsorbed business losses and depreciation
No MAT
Succeeding LLP will not get benefit of MAT as the concept of MAT is not applicable to LLP
AMT is applicable

14. Some Questions
Can the Audits & appointments of earlier Firm be continued?
Can Karta of HUF become partner of LLP?
Can multiple CA Firms convert into single LLP?
Whether Firm must be registered in order to be as LLP?
Can the ROC refuse conversion?
Whether provisions of Partnership Act, 1932 shall apply to LLP
Can a minor become a partner?
Can a body Corporate be a DP?
Can a non resident become a designated Partner?
Cont’d…

15. Some Questions ....... (Cont’d…)
If there is an immovable property in the Company (to be converted), for effecting transfer, whether stamp duty etc. is required to be paid?
Whether Capital Gain Tax will come if Firm has immovable property & converted to LLP?
Where a company is converted to LLP, in order to avoid CG, since nothing except share of Profit is to be paid to Partners for 3 years, can interest on Capital and remuneration be paid?
If converted LLP creates an FD against which partners take loan from bank, whether 47A(4) will attract?
Whether 2 (22) (e) of IT Act on Deemed Dividend is applicable to LLP?
Cont’d…

16. Some Questions ....... (Cont’d…)
Since the rate of tax for smaller companies is now lower, (25%) than LLP (30%), is LLP actually not tax costly?
Whether LLP can take advantage of Presumptive taxation u/s 44AD?
If NBFC is not allowed? How is it better than company for group investment?
For Firm to LLP, whether new PAN is required?
Can LLP raise Public Deposits?
Is having a common seal compulsory?
Cont’d…

17. Some Questions ........ (Cont’d…)
Will an admission of a new partner require unanimity?
If it’s a 2 partner LLP & one partner dies, does the LLP die too?
Can a partner of LLP be forced to retire/expelled?
Is there any way where partners can be held personally liable?
Will the bankers give some weigtage to LLP as a company?

18. Thank You