Company to LLP
A company registered limited company in India (Private or Public) has to company with lot of complex formalities and incurs additional cost for managing affairs including holding mandatory quarterly board meeting, maintenance of statutory records, filling resolutions, financials, annual returns etc with Ministry of Corporate Affairs etc. Which is always an expensive process for maintaining such companies and non-compliance of the same may lead to disqualification of directors, apart from which penalty and punishment provision may also follow. In addition to compliance issues, the income tax provisions for companies are also bit harsh as they are required to pay dividend distribution tax, pay minimum alternate tax etc.
On the other side, absence of such compliances for Limited Liability Partnership together with advantages such as low compliance burden, less government fee for filing of forms, non-applicability of dividend distribution tax on profit distribution, deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961 and Minimum alternate tax provisions, make it a more comfortable and easy mode of running a business.
A company as a going concern can be converted to Limited Liability Partnership without attracting tax on its assets and gain to its shareholders with minimum cost subject to provision of companies act and income tax act. For conversion of company into Limited liability partnership a resolution is passed by board of directors, special is passed in the general meeting, name of the limited liability partnership is reserved by filing form with Ministry of Corporate Affairs, statement of assets and liability of the company is prepared and then application for conversion of company into limited liability partnership is filed with ministry of corporate affairs. After the approval of the conversion of company into Limited liability partnership, a limited liability partnership agreement is drafted among the partners which were shareholders of the company and is filed with Ministry of Corporate Affairs in the prescribed form.
We at TaxMuneem take care of all your needs by providing personal supervision to compile forms and supporting documents.
Drafting of application for conversion into LLP along with attachments.
Drafting of Statement of Account up to date of filing application for conversion.
Drafting of Limited Liability Partnership Agreement
Government Fee for filing application
Cost of LLP Agreement Stamp Papers
Completion of data up to date of drafting statement of account
Cost of DIN/DSC of Director/Partner
Any other cost not included in the inclusion.
Statements of Shareholders
Statement of Assets and Liabilities of the Company duly certified by the Chartered Accountant
List of all secured creditors along with their consent
Approval from any authority, if applicable
Copy of acknowledgement of latest Income Tax Return filed
Any other information required
2-3 months’ time for completion of process and approval from the registrar.
The following shall be the benefits of converting a Company into a LLP: –
- • Lower Registration Cost
- • No limit on Owners of Business
- • The provision of compulsory audit shall not be applicable to LLPs whose annual turnover does not exceeds Rs. 40 Lakhs and contribution from LLP does not exceeds Rs. 25 Lakhs.
- • No Requirement of minimum Contribution.
- • No capital gain on transfer assets from company to LLP
- • No capital gain to shareholders on conversion of company to LLP.
The procedure to be followed for the conversion of the company into LLP shall be as follows: –
- Convene a Board Meeting to pass resolution for conversion of Company into LLP.
- Reserve the name using RUN-LLP as available mca.gov.in.
- File form for incorporation of Limited Liability Partnership (FiLLiP).
- File Form-18. Form 18 is the application and statement for converting the company into LLP.
- After Filing Form 18, Form 14 shall be required to be filed within 15 Days.
- Form 14 is for intimating the Registrar of Firms/ Registrar of Companies of conversion of the firm/ company into limited liability partnership.
As per the provision of section 47(xiii) of Income tax act 1961, where all the assets and liability of company are transferred to a limited liability partnership on account of conversion pursuant to provision of section 56 or 57 of the Limited Liability Partnership Act, 2008, then no capital gain shall arise to the company and its shareholders if following conditions are satisfied:-
- All the assets and liabilities of company before conversion become the property of limited liability partnership.
- All the shareholder in the company become the partners in Limited liability partnership and their profit sharing and capital contribution in the LLP is in the same proportion of their shareholding in the company before conversion.
- No other benefit is received by shareholders other than profit and capital contribution in the LLP.
- The total profit sharing of the shareholders of the company shall not be less than fifty one percent at any time for a period of five year from the date of conversion.
- The total turnover or gross receipts of the company do not exceed sixty lakh and total value of assets as appearing in books do not exceed five crore in any of three previous year preceding the year of such conversion.
- No amount is either directly or indirectly paid out of accumulated profits on the date of conversion to any partner for a period 3 years from the date of conversion.