Proprietorship To LLP

Transformation of Sole Proprietorship into an LLP

Growth is one of the prominent requirements for a business. Limited Liability Partnership, also known generally as LLP, is a prominent alternative for achieving the vision for an organization’s growth. LLP provides the benefits of both a sole proprietorship as well as a partnership firm. In the case of an LLP, businesses get more advantages when compared to traditional partnerships in terms of liability of members.

Therefore, a Limited Liability Partnership provides the additional advantage of limited liability for partners as compared to a sole proprietorship. LLP provides each partner with the liabilities due to misconduct or negligence of other partners. Furthermore, an LLP also provides better flexibility for organization of the internal structure as a partnership according to a mutual agreement. Therefore, transformation of a sole proprietorship into an LLP can be highly recommended for its growth.

One of the foremost benefits of transforming a sole proprietorship into an LLP is the automatic transfer of all assets and liabilities. The transfer of assets and liabilities of the sole proprietorship directly into an LLP turns the sole proprietorship into a single legal entity, distinct from the partners. No single partner can claim ownership of the LLP, while partners can enter into a contract and own assets in the name of the LLP. Partners of an LLP can also sue a third party in any dispute on behalf of the LLP.

The next important benefit of transforming a sole proprietorship into an LLP is the lack of any stamp duty. All the immovable and movable assets of a sole proprietorship are automatically vested in the LLP. Therefore, there is no need for executing any instrument of transfer, thereby taking away the requirement to pay stamp duty.

It is also essential to notice that it is not possible to charge any Capital Gains tax on the transfer of property to the LLP from a sole proprietorship.

The total accumulated losses and the unabsorbed depreciation of the sole proprietorship are considered as the loss or depreciation of the new LLP for the previous year in which it is created. In addition, a succeeding LLP can help in carrying forward such losses further for eight years, thereby providing adequate support for set off.

The brand value of the proprietorship would continue ahead with the LLP while staying intact. As a result, an LLP could gain the best of previous success story of the proprietorship and improved legal recognition.

Partners have to agree on a specific internal structure for management of the LLP. Partners have to determine the duties and responsibilities for operating the LLP while offering flexibility to all partners for creating their own rules of management.

LLP business structures offer better advantages in terms of lower compliance requirements. In comparison to a private company, the restrictions on compliance requirements for the case of LLP, such as audit requirements, are limited. LLPs have to ensure statutory audits only after achieving a specific level of contribution to the LLP or turnover.

If you are troubled about the ideal approach to transform your sole proprietorship into an LLP, then you can rely on us. Here are three simple steps to establish an LLP with us.

1) Basic Formalities

A) Answer our questionnaire within 10 minutes.

B) Facilitate basic details and documents needed for registration of the LLP

C) Complete the payment with assurance of secure payment gateways.

2) Unhindered Expert Support

A) Dedicated Relationship Manager for the transformation process.

B) Support for procuring digital signatures.

C) Assistance with applications for name reservation and drafting documents such as LLP agreement.

D) Help with developing the Certificate of Incorporation.

E) Assistance for the PAN and TAN application processes.

It’s done!

Within almost 21 working days, depending on Government processing time, you have a registered LLP ready to run.