A Partnership Firm is a business run by two or more people who divide profits in an agreed ratio, with unlimited personal liability. A Limited Liability Partnership is a hybrid entity combining aspects of a partnership and a company, with liability limited to each partner's capital contribution. Beyond limited liability, converting brings more flexibility, unlimited partners, perpetual succession, and better prospects for investment thanks to its more organised, corporate structure.
To be eligible, the firm must be registered under the Indian Partnership Act, 1932, and all its partners must become partners in the new LLP at the time of conversion (though partners can change afterward). Unlike partnership firms, LLPs require a Digital Signature Certificate, and all designated partners must obtain a DIN or DPIN.
Procedure for Conversion
- 1
Name Approval
Reserve a unique name for the proposed LLP (two proposed names can be submitted for approval).
- 2
Apply for DSC and DIN
Obtain a Digital Signature Certificate and Director/Designated Partner Identification Number for all designated partners.
- 3
Filing Forms with RoC
File the proposed LLP name, firm details, partnership agreement, partner and capital contribution details, along with partners' consent, a CA-certified statement of assets and liabilities, and the latest ITR acknowledgement.
- 4
Certificate of Registration
After scrutiny, the Registrar issues the Certificate of Registration — the firm dissolves, and its assets, liabilities, rights, and privileges vest in the new LLP.
Documents Required
- Proof of address of the registered office of the LLP
- Subscribers' consent
- NOC from the property's owner
- Proof of identity and address of the applicants
- Copy of utility bills (not more than 2 months old)
Post-Conversion Compliances
Within 15 days of incorporation, intimate the Registrar of Firms about the conversion in Form-14. Within 30 days, submit the LLP Agreement — covering the LLP's name, designated and other partners, capital contribution, profit-sharing ratios, governing rules, and partner rights/duties — in Form LLP-3. Any pending proceedings, orders, or judgements against the firm may be enforced against the new LLP.
Frequently Asked Questions
What is the difference between a Partnership Firm and an LLP?
Partnership implies unlimited liability, with partners jointly or severally liable for debts. In an LLP, partner liability is limited, and a partner isn't held liable for another partner's acts.
What are the benefits of this conversion?
More flexibility, unlimited partners, and perpetual succession.
What happens to existing contracts post-conversion?
They continue in force, with the new LLP as the party, and all authority conferred on the firm transfers to the LLP.
Is a Digital Signature Certificate mandatory for conversion?
Yes — partnership firms don't need one, but it's a prerequisite for LLPs, making it essential for conversion.
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