Step By Step Guide For Conversion of LLP Into A Private Limited Company.

The objective with which one starts a business changes in due course of time. The business may undergo a change of strategy or see an instant growth spurt. Owing to these changes the business type may not turn out to be the most favored one and that is when the need to change the business type arises. Today we will talk about one such change which is the conversion of an LLP into a Private Limited Company. Read on to know more.

LLP and Private Limited Company

Before we get into the effects and procedure of conversion, first let us briefly look at these business types.

1. Limited Liability Partnership- It is a partnership firm where some or all partners have limited liability. It is a startup where one can save on the annual expenses of audits as well as incorporation charges. These firms don’t raise money from venture capital firms.

2. Private Limited Company- A Private Limited Company is a privately held small business entity with fifty or fewer shares. The owner's liability is limited to their number of shares and the capital is infused by the way of shares.

What are the effects of conversion?

The effects of the conversion of an LLP into a Private Limited Company are listed below:-

1. The LLP when converted becomes a company as opposed to a partnership firm.
2. The capital gets infused by the way of shares.
3. Shareholders get introduced into the company.
4. The company has to undergo annual audits.
5. The liability of the owner is limited to the number of shares owned by them.

Documents required for the conversion

Following documents are essential when one wants to convert an LLP into a Private Limited Company:-

1. Approval of conversion from all the seven partners of the limited liability partnership firm.
2. A newspaper advertisement in the local and national circulation
3. A No Objection Certificate from the Registrar of the Companies where the LLP is registered.

Once the above initial procedure is done, the following steps are to be undertaken for conversion.

Step by step guide for conversion

Before the introduction of the Companies Act, 2013, the conversion of an LLP into a Private Limited Company was not possible. This step is simplified today and here is a step by step guide for the conversion:-

1. Submit an application in an electronic format to the Registrar of the Companies (ROC). The items in form INC 1 are to be selected and the name then approved by the ROC stays valid for sixty days.
2. The Digital Signature Certificate is known as DSC and Director Identification Number knew as DIN is to be obtained for all the directors by filing an application with the MCA portal. This application must be attested with the id and address proof and should be filed either by a practicing CA, CS or Cost Accountant.
3. The Form URC-1 is to be filed with details and documents such as:-

1. Name and complete KYC details of the members.
2. List of the first directors of the Private Limited Company with complete KYC documents.
3. An affidavit from all the proposed first directors declaring their competency about not being barred from being a director under Section 164 of the Companies Act, 2013. List and details of the LLP partners.
4. Copy of LLP agreement and LLP registration certificate verified by at least two LLP partners.
5. Statement mentioning details of the nominal share capital, the structure of shares and how is it separated, a number of shares, the price of every share given, the name of the firm etc.
6. Consent letter and No Objection Certificate from the creditors of the LLP.
7. Copy of the newspaper advertisement.
8. Statement of accounts of the company which should not be more than six days old from the date of the application.

4. The most important step is to draft and file the MOA which is Memorandum of Association and AoA which is Articles of Association with the ROC.
5. Filing the important forms such as INC 7, INC 22 and DIR 12 with the registrar.

After completion of all the necessary steps, the Certificate of Incorporation is issued by the ROC which completes the conversion of the LLP into a Private Limited Company.

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