Convert Partnership Firm into Private Limited Company (PLC)

The major benefit of registering a Private Limited Company is that it has the status of a separate legal entity that a Partnership firm does not have. Private Limited Company has Limited Liability whereas in the case of partnership firm partners are personally liable for each and every debt. Private Limited structure is more transparent than other business structures. PLC has its own advantages such as Limited Liability, Perpetual Succession, easy access to funds, etc. Convert your Partnership Firm into PLC following the procedure mentioned below.

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Pre-requisites to Convert Partnership Firm to PLC

  • Partnership Deed must be registered with ROC.
  • Should have 2 or more partners.
  • NOC from all secured creditors.
  • Further, all partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.
  • Amend Partnership deed – Add clause for conversion in deed, if required
  • In addition, consent of the majority of members by calling a general meeting for conversion.
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Steps to convert Partnership Firm into PLC

Step by step guide to help you convert Partnership firm into PLC:

  1. Convene a meeting for the Conversion of Partnership Firm Into Private Limited Company

    – To take assent of majority of its partners, not less than three-forth of the partners should be present in person.
    – To authorize two or more partners to take all steps necessary and to execute all papers, deeds, documents etc.

  2. Apply for DSC and DIN for all directors and shareholders of the company.

    Obtain DSC of all directors and shareholders. In addition to that obtain written consent or No Objection Certificate from the secured creditors of the firm, if any.

  3. Obtain name Approval in RUN

    File an application in RUN on the MCA website to obtain the name for the proposed company after conversion. Along with various attachments. Further also stating the proposal for conversion of the partnership firm.

  4. File Form URC-1 along with the necessary attachments with ROC

    File Form URC-1 within 30 days of name approval.

  5. Publish an advertisement in Two Newspaper

    – As per section 374(b) of Companies Act, 2013 firm seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration.
    – Seeking objections, if any within 21 clear days from the date of publication of the notice.
    – The said advertisement shall be in Form No. URC-2.
    – Further, these shall be published in 2 newspapers one in English and other in the principal vernacular language of the district.

  6. Draft MOA and AOA

    Therefore, after obtaining name approval, and approval of E-FORM URC-1 from the Registrar, the applicant is required to draft the Memorandum and Articles of Association and other relevant documents necessary for incorporation.

  7. File necessary forms with ROC

    File INC-32, INC-33, INC-34 and AGILE along with the earlier mentioned forms on MCA Website.

  8. Once the Registrar in satisfied on the basis of documents and information filed by the applicants,

    He shall issue a certificate of incorporation in Form No. INC.11.

  9. Intimate ROC under which it was previously registered.

    Along with documents for its dissolution as a firm

List of documents to be attached

With Form URC-1

  • A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them.
  • Also, a list of persons proposed as the first directors of the company.
  • An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under section 164(1). Further that all the documents filed with the Registrar for registration of the company contain correct, complete, and true information to the best of his knowledge and belief.
  • Partnership deed, along with the revised deeds, in case the firm is regd.
  • A statement of assets and liabilities of the partnership firm duly certified by a chartered accountant.
  • Further, a copy of the latest income tax return of the Partnership Firm.
  • A statement specifying the following particulars:
  • The nominal share capital of the company and the division of shares.
  • The number of shares taken and the amount paid on each share.

With Form_INC-32, INC-33, INC-34

FAQs

Is capital gain or stamp duty charged on conversion?

No Capital Gains tax or stamp duty shall be charged on transfer of property from Partnership firm to a Private Limited Company.

What are the minimum capital requirements to convert partnership into private limited?

Following are the minimum requirements:
– Appointment of minimum 2 directors, out of which one must be a resident of India.
– Minimum requirement of 2 shareholders for this registration. Further, an individual may become shareholder and director at the same time.
– A place of business in India must be provided as a regd. office address

Convert Private Limited Company (PLC) into LLP

Lets first understand what is LLP. LLP is governed by Limited Liability Partnership Act- 2008 which came into force from April 1, 2008. It is a combination of both the Company and the Partnership Firm. It is especially suitable for small to medium-sized business enterprises. LLP is a separate legal entity having a minimum of 2 partners. There is no such limit on maximum partners. Consent of all shareholders of Private Limited Company (PLC) is to be taken in order to convert Pvt Ltd into LLP. You Can download forms for conversion from here.

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Procedure to convert Pvt Ltd into LLP

Follow the detail procedure in order to convert Pvt Ltd into LLP:

  1. Obtain DIN for those designated partners who don’t possess DIN already.

    The minimum number of designated partners for the incorporation of an LLP is two. One of them must be an Indian resident.
    Further, it is important to apply for a DSC before applying for the DIN.

  2. The board meeting will be required to be held to consider the proposal of conversion.

    The board resolution is to be passed for Conversion of Company into LLP. And to approve any director to Apply for Name of LLP.

  3. File an application for name availability with ROC.

    The company will have to apply for a reservation of the name of LLP.
    And get the name Approval Certificate from ROC.

  4. Once you get name approval, file Incorporation E Form FiLLiP with ROC.

    File E Form FiLLiP along with information and details on MCA Portal.

  5. File Form 18 with ROC for conversion of company into an LLP.

    Form 18 needs to be filed with form for incorporation itself.
    It needs to be filed along with following attachments:
    1. Statement of the consent of shareholders (Mandatory).
    2. Statement of accounts of the company certified as true and correct by the independent auditor.
    3. List of all the secured creditors along with their consent.
    4. Copy of acknowledgement of latest income tax return (Mandatory).

  6. Once you comply with all the formalities, and receive approval by the Ministry.

    ROC will issue COI as to the conversion of LLP

  7. After that, draft LLP agreement.

    Further file E-Form 3 along with information about the LLP Agreement entered into between the partners.
    File this form within 30 days from the date of conversion of the company into an LLP.

  8. File E- Form 14 (Intimation to ROC) within 15 days from date of conversion.

    Along with the following attachments:
    1. Copy of Certificate of Incorporation (COI) of LLP.
    2. Submit Copy of incorporation document in E-Form FiLLiP to ROC.

FAQs

What are the effects of conversion?

The following are some of the effects of conversion :
1. The private company is dissolved after conversion.
2. The name of the PLC will remove from the register of the ROC.
3. The conversion will not affect existing liabilities, obligations,etc
4. It shall also no affect agreements, contracts and continued employment.
Company has to intimate all the authorities concerned about the conversion. Further make necessary changes in all the registrations and licenses.

Why is LLP better than company?

The following are some of benefits of LLP:
1. There is no limit to the number of partners, which is not so in case of private companies.
2. There is no compulsion on holding a minimum number of meetings and maintaining statutory records.
3. No requirement of minimum contribution
4. No requirement of compulsory Audit

Can an LLP retain profits?

There is no option in an LLP to retain Profits of following year unlike other companies. Therefore all profits made must be distributed in the same financial year.

Process for conversion of Partnership Firm into LLP

Limited Liability Partnerships have more priority over the general partnership structure as it is much more beneficial for the partners. It is a business structure that integrates the advantages of the company’s corporate structure and the flexibility of the partnership. The conversion of a partnership firm to LLP shall be as per Section 55 of the Limited Liability Partnership Act 2008 read with Schedule II of the Act.

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LLP is a separate legal entity with compulsory registration with the central government. However, it is not the case with the partnership firm. LLP offers a host of features mentioned below making it more attractive than a partnership firm:

  • Limited liability protection,
  • Survivability,
  • Ability to take on an unlimited number of partners and
  • Ease of ownership transfer.
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Steps for conversion of Partnership Firm into LLP:

Step by step guide for conversion of Partnership Firm into LLP:

  1. Obtain Digital Signature for all the partners.

    Generally partners in a Partnership Firm would not have a digital signature as the same is not necessary for the registration of a partnership firm.

  2. Partners in LLP require a DPIN/DIN. Therefore obtain DPIN/DIN for all partners.

    A DIN is a unique number for each person who is an LLP Partner or Director.

  3. Make an application in RUN-LLP Form for name reservation on MCA website.

    Before applying for reservation of name, applicant must check the rules for selection of LLP name.

  4. File Form FiLLiP for Application and Statement for the Conversion of Partnership Firm into LLP.

    The documents required for LLP registration and for Form FiLLiP.

  5. Once the process of incorporation is complete by filing Form FiLLiP, the next step is to register the LLP Agreement with MCA.

    File LLP Form 3 for LLP Agreement registration which contains details of LLP agreement along with partners resolution with MCA.

  6. On successful conversion into LLP ROC shall issue Certificate of Incorporation of LLP.

    Further when the LLP is incorporated and the Partnership Firm is converted the Partnership Firm would be deemed to be dissolved.

FAQs

What documents are needed to convert a partnership into an LLP?

Following documents are necessary to convert a partnership into an LLP:
– Address proof of the office
– Regulatory authority’s approval
– Details of all the partners and directors
– Consent of all the partners and directors
– Latest income tax return filing
– NOC from tax authorities
– Creditors and their consent
– Certified liabilities and assets of the partnership

Whether any Annual Return would be required to be filed by an LLP?

Every LLP would be required to file an Annual Return with ROC. LLP shall duly file Annual Return in e- Form-11, with the Registrar. Along with the prescribed fee, within a period of 60 days from the end of every financial year.

What is the difference between designated partner and partner?

Both designated partners and partners are categorized differently in LLP. Additionally, the designated partners are more liable than the partners. Further, they are accountable for the day to day business activities as well as for all regulatory and legal compliances.

Conversion of Private Limited Company to Public Limited Company

Let us first understand what is a public and private limited company. Public Limited Company is a separate legal business entity. In addition the shares of this company are traded on the stock exchange for the general public. Whereas Private owners own a private limited company. This type of entity limits the owner’s liability to their ownership stake. Further PLC also restricts shareholders from publicly trading shares. The main advantage of Public Company is that it can raise reserves on a large scale. Here are benefits when you convert PLC into a Public Limited Company.

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Benefits of Public Limited Company:

  • Raising Capital: The biggest advantage of being a Public Limited Company is that it can raise capital from the public by issuing shares. However, this would require listing on the stock exchange.
  • Share Transfer: Shareholders can transfer shares of Public Limited Company easily. Therefore shareholders have a benefit of liquidity by filing the share transfer form and hand over the share certificate to the buyer.
  • Greater Credibility: As per Company Law, 2013 a Public Company has to compulsorily present its financial stats and position publicly to maintain transparency. It also has to convene the Annual General Meeting for all the shareholders. These compliances bring a great deal of credibility.
  • Other Financial Opportunities: Listing of Public Limited Company helps in improving the creditworthiness of the company when issuing corporate debt.

The process to convert Private Limited Company(PLC) into Public Limited Company

Here is a detail procedure for voluntary conversion of Private Limited Company into Public Limited Company:

  1. Conduct a Board Meeting.

    Pass a Board Resolution to get the in-principal approval of Directors for conversion. And also for increase in number of directors upto 3, if directors are less than 3.
    Further fix date, day and time for conducting Extra-ordinary General Meeting to get an approval of shareholders.

  2. Send notice to shareholders along with agenda and explanatory statement as per Companies Act, 2013.

    In EGM, pass Special Resolution to get shareholders approval for Conversion of Private Company into a Public company. In addition obtain approval for alteration in the Articles of Association for such conversion.

  3. For alteration in AOA file the below forms along with the copy of special resolution with concerned ROC.

    File Form MGT-14 within 30 days of passing the resolution at EGM on the MCA Website.
    After that file E-Form INC 27 for conversion of the company with MCA along with necessary attachments.

  4. After receiving the documents, ROC shall satisfy itself that the company has complied with requisite provision for conversion.

    Further which ROC shall enclose the previous registration and issue a fresh Certificate of Incorporation.

FAQs

Who controls a Public Limited Company?

Shareholders are the owners of a public limited company. However, they elect a board of directors who make decisions on behalf of the business.

Why would a private company (PLC) change to a public company?

Shares in a public company are easily transferable in comparison to the PLC. Further the shareholders can sell the shares and benefit from its liquidity. Therefore this acts as an incentive for people to invest as they are not bound to remain with the company forever.

What are the requirements in order to convert into Public Limited Company?

The company should fulfill the following requirements before converting into Public Limited Company:
– DSC for 1 Director
– Minimum 7 Shareholders
– DIN for all directors
– Minimum Authorized Share Capital of Rs 5 lakhs
– Minimum Paid up Share Capital of Rs.5 lakhs
– Director and shareholder can be the same person
– Minimum 3 Directors

What are the Documents required for conversion of PLC to Public Company?

Following are the documents required for conversion:
– Copy of PAN Card of Directors
– Passport size photograph of Directors
– Copy of Aadhaar Card/ Voter identity card
– Copy of Rent agreement, if property is on rent.
– Electricity/ Water bill (Business Place)
– Copy of Property papers (If owned property)
– In addition to rent agreement NOC of Landlord

Process for Conversion of an OPC into Private Limited Company

Conversion of an OPC to Private Limited Company can be voluntarily or by compulsion. In both the cases, there is a need to follow proper procedure. And shall require necessary alterations in the MOA and AOA of the OPC. However, it may be noted that the conversion of an OPC into a Private Limited Company as per Section 18 of the Companies Act, 2013 and the rules of Companies (Incorporation) Rules of 2014, shall not affect the existing debts, liabilities, obligations or contracts of the OPC. In addition, these will inevitably be discharged by the newly formed private limited company. Further, there may be two scenarios to convert OPC into Pvt Ltd Company.

  1. Compulsory Conversion
  2. Voluntary Conversion
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Compulsory Conversion of an OPC into Pvt Ltd

It is mandatory for an OPC to convert into a Pvt Ltd Company within 6 months if it surpasses the below-given parameters:

  1. Paid up share capital of an OPC exceeds Rs.50 lakhs and
  2. Average annual turnover of immediately preceding three consecutive financial years exceeds 2 crores.

During the conversion, the members have to just pass a special resolution in the general meeting. Further, obtain No Objection Certificate from creditors and other members before passing the resolution.

Process for Compulsory Conversion

  1. Convene a general meeting and pass Resolution for increase in the number of Directors and shareholders.
  2. For converting an OPC to a Private Limited Company, there should be at least 2 shareholders and 2 directors.
  3. Furthermore, shareholders shall pass a resolution for approving the alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC.
  4. File E- form INC-5 with ROC within 60 days of exceeding threshold limits, informing that it has ceased to be OPC. And now it requires to convert itself into a private company.
  5. Further file E-Form INC-6 on the MCA Website within 6 months of conversion.
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Voluntary Conversion

  • OPC cannot convert itself into a Private Limited Company for a period of two years from the date of incorporation.
  • Further when two year time period is over OPC can apply for converting itself into Private Limited Company.
  • OPC has to communicate voluntary conversion to a ROC in Form INC-5 within sixty days.
  • For conversion pass a resolution to increase the number of directors and shareholders.
  • For converting to a private limited company, OPC should have minimum of 2 directors and 2 members.

FAQs

Can OPC appoint Members before to meet the minimum compliance requirement of Private Company before conversion?

No, the One Person Company can have only one member and therefore the Company cannot increase the members before conversion. However, after conversion, it shall increase the number of members to meet the minimum compliance requirement.

What is the effect after conversion of OPC to a private limited company on the liabilities of previous company?

The conversion shall not affect, the liabilities, debts or obligation of the company in any way. Therefore, the company shall be liable for all its previous obligations.