LLP into Private Limited
Whether you want to start as an LLP or private limited company depends upon the objective, scope and capital and sale of the business entity. LLP is recommended when the capital amount is less than 25 lacs and sales turnover is more than 40 lacs. In such cases, LLP is not required to audit their statements and other compliance obligation and thus reduce cost. If LLP crosses the sales turnover of Rs.40 lakhs or capital contribution of Rs. 25 lacs, then it is advisable to opt for Private Limited Company as the compliance requirement of LLP will be same as that of a company. In addition, LLP won’t be able to raise equity capital as currently there is no procedure for LLP conversion into Private Company. Hence, if the entrepreneur wants to expand business and infuse equity capital from private equity investors, venture capitalist or angel investors than a Pvt limited company is the best choice.
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Limited Liability Partnership (LLP):
A limited Liability Partnership means a business where minimum two members are required and there is no limit on the maximum number of members. The liability of the members of an LLP is limited.
Private Limited Company:
A Private Limited Company is that type of company that offers Limited Liability or legal Protection to its shareholders. Private Limited Company in India lies somewhere in between a partnership firm and a widely owned public company. It can be registered with minimum two people. A person can be both a director and shareholder in a Private Limited Company.
The liability of the members in a Private Limited Company is limited to the amount of shares held by them. A private Limited company in India can start its business after getting the certificate of incorporation. It can be incorporated within 5-6 working days.
Reasons for conversion of LLP to Private Limited Company
- For the extension of the existing business
- For issuance of equity share capital in the company and for increasing the investors in the company.
- To avoid capital gain tax
- To carry forward of unabsorbed losses and depreciation of last years.
- For maintaining the brand name or goodwill of the existing entity.
Pre-requisites of conversion of LLP to Private Limited Company
- LLP having two or more partners can be converted into private limited company. And in the case of public company minimum 3 partners are required
- The LLP must have complied with all the applicable returns
- The LLP should give newspaper advertisement in one English and in one vernacular language generally used in the locality of the registered office regarding the conversion of the existing LLP into private limited.
Documents Required for LLP to Private Limited
- Photograph of all the Directors
- PAN Card of all the Directors
- ID Proof of all the Directors (Driving License/Passport/Voter ID)
- Electricity Bill or any other utility bill for the address proof of the Registered Office
- No Objection Certificate to be obtained from all the secured creditors of the applicant
- Written consent or no objection declaration from partners of the firm
- A copy of latest returns filed by the LLP
Advantages of Conversion of LLP to Private Limited Company
A Private Limited Company holds a high reputation in the eyes of third parties as compared to LLP. Even though an LLP is a separate legal entity from its partners, its reputation is not as high as a Private Limited Company.
A Private Limited Company in India is the only form of business except Public Limited Companies that can raise funds from the Venture Capitalists or Angel investors.
Separate Legal Entity
A Pvt Ltd Co. is a separate legal identity in the court of the law, meaning assets and liabilities of the business are not same as the assets and liabilities of the directors. Private Limited Company and its members are counted as different.
In private Limited Company, 100% Foreign Direct Investment is allowed that means any foreign entity or foreign person can directly invest in a Private Limited Company.
It means that if the Private Limited Company go though some financial distress because of business activity, the personal assets of the members of the companies will not be used to pay the debts of the Private limited Company.
The particulars of the company are available on a public database. Which improves the credibility of the company as it makes it easy to authenticate the details
How to convert LLP to Private Limited
Frequently Asked Questions
A private limited company must have a minimum of two Directors and can have up to a maximum of fifteen Directors. But if you are a sole owner, you can incorporate One Person Company also.
It generally takes 8-10 working days to register Private Limited Company in India. The time taken for registration totally depends on submission of relevant documents by the client and speed of Government Approvals. To ensure quick and speedy registration, please choose a unique name for your Company and ensure you have all the required documents prior to starting the registration process.
The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company. Digital Signature application is to be filed to obtain DSC.
Yes, a Foreign National or an NRI can become a Director in a Private Limited Company in India after obtaining Director Identification Number (DIN). However it may be noted that at least one Director on the Board of Directors must be a Resident India.
Yes, Foreign or holding Companies can incorporate a wholly owned subsidiary in India, as a 100% owned Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.
Kanakkiyal.com provides Private Limited Company Registration all across India. You can obtain Private Limited Company registration in Ahmedabad, Mumbai, Pune, Bangalore, Chennai, Delhi, Kolkata, Kanpur, Nagpur, Jaipur or any other cities easily with us.
MOA means Memorandum of Association and AOA means Articles of Association. These are the byelaws or rules based on which important matters like main business of the company or meetings is decided. These are standard legal documents prepared by Company Secretaries during registration of the Company.
Yes, company office address can be changed anytime after incorporation.
Capital means investment made by shareholders into the company. Authorised capital is an amount up to which company can issue shares. This capital is mentioned during incorporation of the company based on which ROC registration fees and stamp duty is paid. Paid up capital is an actual investment which goes from shareholders into company bank account, against which share certificate is issue by the company.
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