LLP To Pvt. Ltd. Company

Under the provision mentioned in Section 366 of Companies Act, 2013, and company rules 2014, an LLP organization has all rights to convert itself to a Private Limited Company.

 A lot of businesses in India start as a Limited Liability Partnership or LLP. But with passing time, all of these companies want to convert themselves from LLP to Limited Company. Conversion of LLP to private limited offers more growth and prosperity to a Business. Under the provision of Section 366 of companies Act 2013 and company's rule 2014 (authorized to register), an LLP can convert to a private limited. 

 But before converting as a private limited entity, there are several requirements that you need to fulfill. For example, to be a private limited company under the provision of company Act 2013, you need to have seven stakeholders. And you must seek approval from all of these seven stakeholders. The incorporation process of being a limited company begins after you post an advertisement on the local or national newspaper, and obtain NOC from the ROC.     

1) All the small businesses become aware of the concept of LLP.

2) Makes it easier to control the business.

3) It offers you the benefits of limited responsibility; small businesses can also organize their company internally.

4) You need to audit only if your annual turnover exceeds 40 lakhs, and capital contribution is more than 25 lakhs.

5) The LLPs are not liable to pay the DDT or dividend distribution tax.

6) LLP is not bound to conduct a board meeting or annual meeting.

7) Registration process is simple to that of a limited company.

1) Usually, LLPs do not have the concept of stakeholders. So, all the owners in an LLP are partners. They are considered unsuitable for the investors as they do not possess any desire to indulge themselves in the management of the company. However, Private Limited Company is best for investors. If the business is evolving, then owners must convert it into a private limited entity.

2) Nowadays, FDIs are gaining popularity in the Indian Market. Converting to private limited provides you all access to FDIs. You do not need to seek any approval from the government for FDI. 

1. Name approval

You have to obtain the name approval from the ROC by filing an e-application.

2. Securing DSC and DIN

All the seven directors of the company have to obtain their digital signature certificate and Digital identification Number. 

3. Filing of URC-1

Once you obtain your name approval, you have to fill the form with no URC-1 for further process.

4. MOA and AOA

TIn this step, you have to formulate MOA and AOA and submit it at the registrar.

An essential reason to convert from LLP to private limited is growth in business. The framework made for LLPs usually does not fit venture capitalists or private equity. And the investors feel more secured to invest in a Private limited company. So conversion from LLP to private limited would be a wise decision.

1.Preservation of brand value

When an LLP converts into a private limited entity, it can continue with its brand name without making any efforts for brand promotion.

2.Taking forward the unabsorbed losses

After the incorporation of LLP to private limited, none of your expenditure will be incurred in bookkeeping, as all the losses will carry forward on the conversion.

3.Employee stock ownership plan for employees

Converting from LLP to private limited company enables all the businesses to offer employee stock ownership plans to their employees. Plans like this help the companies to attract efficient employees. You can also offer an incentive plan for the employees to work for your company.

4.Ease in fundraising

Usually, the registration process to be a private limited company is quite strict. It helps the companies to gain more credibility. As a result, companies can find more fundraising from external sources.

5.Separate legal assistance

Converting to private limited companies enables separate ownership to pay attention to potential works where shareholders can be assigned to run the company without losing the capability to vote.

6.Limited responsibility of owners

The conversion from LLPs to private-limited limits owners' responsibility to the capital subscribed and unpaid by them.