Introduction

Using a business organization's LLP form can be problematic as other business organization alternatives offer better opportunities for growth and business expansion. Therefore, the amazing benefits offered by other organizational structures will attract shareholders. Therefore, that could result in the conversion of the LLP into a Private Limited Company.Previously it was not possible to convert LLP into a limited private company. However, in terms of section 366 of the Companies Act, 2013, any affiliate company or LLP, joint venture, or other law firm with two or more members may find themselves limited liability company.

Advantage

  1. LLPs have no shareholder idea. Therefore, all LLP owners will become partners in LLP. This structure is not suitable for Venture Capitalists and Private Equity Investors - who do not wish to participate in the management of the Company. Therefore, financial investors will only invest in a Private Limited Company. Therefore, if founders or promoters have plans to expand the business by raising equity capital, the business should be registered as a limited liability company.
  2. Foreign Direct Investment (FDI) in a private limited company is subject to an automatic route and FDI in the LLP is below the approved threshold. Therefore, businesses with foreign or NRI incentives prefer limited liability company coverage.
  3. Tax credit in relation to income tax deductions received from certain companies (e.g. MAT credit U/S 115 AA).
  4. The tax rate for a company earning a maximum of Rs.400 is 25%. However, LLPs are taxed at 30% rates regardless of where they are located.
  5. Penalty for non-compliance or finalization of documents in the Corporate Affairs Department most of the time is higher on the LLP as it is a payment of Rs.100 per day when the tax is not related to the debt. Therefore, LLPs may receive a capital penalty or penalty from the MCA for non-compliance.
  6. A limited private company offers its promoters a better image or position than that of the LLP. A limited private company also enjoys better access to capital from banks and direct foreign investment.

Disadvantage

  1. Private limited companies are limited to No shareholders and in LLP there is no such limit.
  2. Auditing is not required with annual turnover of LLP less than ls.40 and LLP has a capital contribution of less than Rs.25 lakhs. While, a Private Companies Company, research is appropriate regardless of sales or capital gain.

Process

  1. Approval of the name
  2. To obtain an approved name from the ROC, one needs to submit the Spice +(earlier RUN Form) form which is in e-format. Various items must be completed while submitting the spice+ form. Also, the ROC-approved name is available for twenty-day use only for a new company and sixty days for changing an existing company name.
  3. Acquiring DSC and DIN
  4. Apply for a Digital Signing Certificate (DSC) and Director Identification Number (DIN) for all LLP members who will, after conversion, become directors of a Private Company.Proof of address, proof of identity, proof of identity, recent passport color and application must be provided. The DIN can be accessed directly by submitting application forms
  5. Completion of Form
  6. Once, the ROC acknowledges the name; Form URC-1 must be submitted by the applicant. The following is a list of documents to be submitted along with the form
    • Information such as name, address, shares held by members should be provided along with a list of members
    • Names, address, DIN, passport number with expiry date of all original directors of a private company must be provided.
    • In terms of section 164 of the Companies Act, 2013, an affidavit must be served by all previous directors of Company Limited claiming that they are not prevented from becoming a director. Also, all documents that need to be filed with the ROC for company registration should have that information as complete and accurate and accurate as possible in your belief and information.
    • A copy of the LLP agreement and a list with the names and addresses of LLP partners and a certificate of registration properly validated by the designated LLP partners must be provided.
    • A statement to be provided containing details of the capital share capital and the value of its shares divided, the number of shares taken and the amount paid per share and the name of the company for confidentiality.
    • An opposing certificate from all creditors must be provided.
    • An appropriate statement of company accounts by the auditor not to be more than 6 days prior to the application date and a copy of the newspaper advertisement must be provided

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