Converting a Proprietorship Firm into LLP

Advantages

All the assets, movable and immovable and liabilities are transferred to the LLP; there is no necessity of any instrument of transfer. So there is no need to pay stamp duty or capital gains tax on transfer to the LLP.

The losses and unabsorbed depreciation of the proprietorship are passed on as the previous year's losses of the successor LLP on conversion. This loss is set off within 8 years and is carried on.

The brand name and goodwill of the company is unaffected and carries ion during the life of the LLP; so the business enjoys the same legal recognition and success story.

Steps to convert proprietorship firm into LLP

The first step is to apply for the DSC or Digital Signature Certificate with self attested proof of address and identity. This process takes 1 day.

Next is the application for the Designated Partner Identification Number or DPIN; it is necessary to get an approved DPIN for the incorporation of the company. Applying and getting a provisional DPIN first would involve certification and attestation of the personal details of the director. These documents have to be submitted later to the MCA cell for approval. It could take about 5 working days.

The pre-name application search is the third step; it involves first making an online search for the company names available. The promoter has to look for desired names and then provide a minimum of 6 names on priority basis.

Next is the application for name availability that could take about 6 working days. It involves filing of Form 1, 6 names for the company and the filing of the Main Object Clause of the LLP. So drafting of the Main Object Clause to be pursued after incorporation is very necessary.

The fifth step is the making of representations before the Registrar of Companies; taking about 1 day, it involves making changes in the Name application as suggested by the Registrar of Companies.

The next step that follows is the drafting of the LLP agreement and then getting it vetoed by the promoters before sending it for printing. It also involves processing of e-forms. The documents required for incorporation of the LLP are LLP Agreement duly stamped, Form 2, Form 3, Form 4 and Form 9, the subscription sheet signed by the promoters, and proof of address of the registered office of the company. The process would take 2 days.

The final step is filing the required documents before the Registrar Of Companies and following up with him/her. This also involves online uploading of e-Forms, payment of registration fees and the issue of Certificate of Incorporation. Changes should also be made in the LLP Agreement and other documents required for incorporation according to the suggestions of the Registrar Of Companies.

 

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