Conversion of a Partnership firm to Limited Liability Partnership LLP in Mumbai, Maharashtra

If you are planning to convert your Partnership firm to Limited Liability Partnership LLP in Mumbai, Maharashtra, you will find here the complete information like advantages, procedure, documents required, eligibility criteria for the same.

Limited Liability Partnerships (LLPs) in Mumbai, Maharashtra as the name suggests offering the advantage of limited liability over a partnership firm. This and so many other features of Limited Liability Partnerships (LLPs) like more flexibility, the option of having unlimited partners is driving people to convert their partnership firms to LLPs.

The conversion of a Partnership firm to a Limited Liability Partnership LLP in Mumbai, Maharashtra is a very smart business decision at the time when business grows and there is a need to secure the rights of the partners and also minimise their liabilities. It is seen that the LLPs in Mumbai, Maharashtra have an advantage over the general partnership structure as it is much more beneficial as well as safe for all the partners involved, and hence are more widely preferred.

Limited Liability Partnership in Mumbai, Maharashtra is an independent legal entity with provision of compulsory registration with the central government, which is not required in case of general partnership. LLP integrates the advantages of the company’s corporate structure and the flexibility of the partnership, i.e. for organizing their internal composition and operation as a partnership. Limited Liability Partnerships (LLPs) are the hybrid form of a partnership firm and a private limited company. An LLP is the most suitable form of business for Small and medium-sized enterprises in Mumbai, Maharashtra.

Conversion of Partnership firm to Limited Liability Partnership LLP in Mumbai, Maharashtra

If Mumbai is the business as well as financial capital of the India, Pune is also one of the major cities in the state capital of Maharashtra. Mumbai houses the headquarters or registered offices of various major corporate and financial institutions whereas Pune also has various corporate offices and Educaional institutions. Mumbai is also the epicenter for some of the important industries like film industry and capital markets. Being the financial capital, it also hosts head quarters for various Banks, stock exchanges and other financial power houses. To further attract industries to the Mumbai, Pune or other parts of Maharashtra, the state government established Maharashtra Industrial Development Corporation (MIDC). Mumbai has port like JNPT (Jawahar Lal Nehru Port Trust) and Mumbai port that facilitates the import and export very easily from the surrounding areas like Bhiwandi, Taloja, Navi Mumbai, Thane, etc. Jawaharlal Nehru Port Trust (JNPT) is one of the largest container port in India with connection to 34 Container Freight Stations (CFS) along with 46 Inland Container Depots (ICD).

Few of the major industries in the state of Maharashtra are textiles, petro chemicals, automobile or auto components, mechanical and machinery, chemicals, electrical and white goods, transport, mining and metallurgy. Maharashtra is the hub for manufacturing of automobiles and auto components. Maharashtra is the 3rd largest state in India with coastline of 720 km along with 55 amll or large sized ports. These ports enables more than 20% of the total cargo transport in India. Maharashtra has a good presence of industrial clusters, especially automobile, IT & ITeS, chemicals, textiles and food processing clusters and offers lucrative investment opportunities in these sectors. Maharashtra’s Gross State Domestic Product (GSDP) for 2019-20 is expected to be $411.23 bn.

Maharashtra has ranked #1 in Export Preparedness Index in 2020. Moreover, the state has attracted over $7.2 Bn of Foreign Direct Investments during Oct’19-Mar’20.As per the latest report by World Bank, Maharashtra state ranked at 13th out of 36 states in terms of ease of doing business ranking. Mumbai is a leading city for business to start not only in Maharashtra but in the India as well.

Advantages of Conversion of Partnership firm to Limited Liability Partnership LLP in Mumbai, Maharashtra

• Has an Independent Legal Identity – The partnership is not a separate legal entity and thus it dissolves when either of the partners die. On the other hand, this isn’t a problem with Limited Liability Partnerships where the company is a separate legal entity and there is nor need to form a new partnership when any partner dies or wants to leave.
• Reduced Liability of the Partners – In the LLP Agreement, the partners agree to a certain amount of capital contribution and that is what their liability gets limited to. Moreover, the negligence or misbehavior of one partner will not be a burden on another partner in any way.
• Raising Capital is easier – With Limited Liability Partnerships, raising capital becomes much more convenient as it lets a partner participate with capital along with minimal liabilities and accountability.
• Increased Tax Benefits – With Limited Liability Partnership, savings of the Dividend Distribution Tax, Minimum Alternative Tax, and Income Tax because the interest gets paid to the partners as a salary that is payable to the directors.

Key difference between a Limited Liability Partnership (LLP) and a Partnership Firm in Mumbai, Maharashtra

• Legal Entity – A Partnership firm is not a separate legal entity while an LLP is.
• Liability – Under the LLP the. Partners have the liability to the extent of their capital invested in the firm while in a Partnership firm the partners have unlimited liability and their assets are also liable to cover the liabilities.
• Books of Account – For a partnership firm maintaining books of accounts are not mandatory till certain volumes are achieved however as per LLP act an LLP has to maintain the books of account from inception.
• Number of Partners – A partnership firm can have only up to 20 partners in the firm while an LLP can have an unlimited no of partners.
• DSC – The is no requirement of having a Digital Signature Certificate (DSC) for the partners in a Partnership firm however in an LLP all the designated partners must obtain DSC.

Why choose a Limited Liability Partnership over a Partnership Firm in Mumbai, Maharashtra?

Following are the features that make an LLP more attractive than a partnership firm.

• Flexibility – The flexibility in managing the business and conducting day-to-day operations of the LLP is better in comparison to a partnership firm.
• Succession – An LLP being a separate legal entity, the death of a partner does not affect the continuation of the LLP, however in the case of a traditional partnership firm the business ceases to exist.
• Investment Opportunity – Since an LLP offers limited liability and has a more organized structure for running the business in Mumbai, Maharashtra, the investors and venture capital funds find it as a better option to make investments.

Eligibility Criteria for the Conversion of Partnership firm to limited Liability Partnership LLP in Mumbai, Maharashtra

• The LLP has to have the same people as partners that formed the original Partnership firm.
• The proportion of capital in the book of the firm has to be the same as the original Partnership on the date of conversion.

Please note here that any changes in the number of partners is allowed only after conversion from Partnership to an Limited Liability Partnership LLP in Mumbai, Maharashtra.

Others conditions for Converting a Partnership Firm to Limited Liability Partnerships in Mumbai, Maharashtra

• Section 55 along with Schedule II of the Limited Liability Partnership Act 2008 deals with the conversion procedure of a partnership firm to a Limited Liability Partnership.
• During conversion all the partners of the existing partnership firm remain the same. No partner can exit or no new partner can be admitted while applying for an LLP.
• At the time of applying for an LLP all the partners must hold a valid Digital Signature Certificate (DSC) and a minimum of two partners must have a DPIN.
• The original partnership firm must have been registered under the Partnership Act, 1932.
• All the partners must provide their consent for the conversion of the partnership firm to the LLP.

List of Documents required for the Conversion of Partnership Firm to Limited Liability Partnership LLP in Mumbai, Maharashtra

• PAN Card of all partners and the firm.
• Passport (in case of foreign nationals and NRIs)
• Aadhar Card, Voter ID Card of all the partners.
• Passport size photos of all the partners.
• Electricity/ Water Bill of the registered place of business.
• Rent Agreement of the registered place of business (in case of rented property)
• No Objection Certificate from the owner of the registered place of business (in case of rented property)
• RoF Certificate (in case of registered partnership firm)

Please note that all the above mentioned documents have to be either apostilled or notarized in case the partners are NRIs or foreign nationals.

Procedure for Conversion of a Partnership Firm to a Limited Liability Partnerships in Mumbai, Maharashtra

Step 1 – Name Approval and Digital Signature Certificates

• A name has to be registered through the MCA portal.
• Under the Services tab of the MCA portal “RUN – LLP” is selected which means “Reserve Unique Name”.
• Select “Conversion of Firm into LLP” from the dropdown menu.
• Two names for the LLP are given as Proposed Names.
• Supporting documents are uploaded in PDF format and “Submit” the application for names.
• Upon clicking the “Submit” payment gateway page is opened where Rs. 200 is to be paid for the form.
• The reserved name has a validity of 90 days.
• To file every e-form the DSCs of the Designated Partners are required and are used for successful submission. For Name Incorporation also the Digital Signature Certificates of the Designated Partners are required.

Step 2 – Filing of the Forms with the RoC in Mumbai, Maharashtra

1. Form 17 (Application and Statement for conversion of a firm into LLP)

The application form 17 is submitted with the following information:

• Service Request Number (SRN) of the Reserve Unique Name (RUN).
• Name of the Proposed Limited Liability Partnership.
• Address, registration number, and partnership agreement details of the firm.
• Number of partners and capital contribution by the partners.
• Secured creditors details.

Attachments:

1. Statement of Consent of all the partners of the existing partnership firm.
2. CA-certified statement of assets and liabilities of the existing partnership firm.
3. Latest Income Tax Return acknowledgment.
4. List of all the secured creditors along with their consent.
5. Form FiLLiP (Form for incorporation of LLP)

The application form FiLLiP is submitted with the following information:

• It shows auto-filled Reserve Unique Name RUN of the LLP.
• Registered office address and email id of the LLP.
• Office of the Registrar.
• Nature of business activities.
• Details of all the partners, designated partners, and the details of their DINs, DPINs, and PANs.
• Capital contribution of the partners in the LLP.

Attachments:

1. Address proof of the registered office of the LLP in Mumbai, Maharashtra.
2. Subscriber’s consent.
3. NOC from the owner of the property at which the registered office will be located along with the copy of utility bills (not more than 2 months old).
4. Identity proof and address proof of the applicants.
5. Approval of any regulatory authority, if required.
6. Details of other LLPs or the companies where any designated partner is also a partner or a director.
7. If the name of the LLP is identical to any existing LLP or the company, a copy of consent from the existing LLP or the Board Resolution from the Company serving as a NOC.

Both these forms are e-signed by the proposed designated partners and certified by a practicing CA, CS, or Cost Accountant. The fee for the same may vary as per the amount of the capital contribution.

Step 3 – Issue of Registration Certificate

Once the application is approved the Registrar issues “The Certificate of Registration” to the LLP.

Step 4 – LLP Agreement (Form – LLP3)

Within 30 days of the incorporation the LLP Agreement is submitted containing the following particulars:

1. Name of the Limited Liability Partnership.
2. Name of all the partners along with the designated partners.
3. Details of capital contribution by each partner and profit-sharing ratios among the partners.
4. Rights and duties of the partners.
5. Rules and regulations of the business governing the LLP.

Step 5 – Intimation to the Registrar of Firms (Form – 14)

An intimation regarding the conversion of the partnership firm into LLP in Mumbai, Maharashtra is given to The Registrar of Firms within 15 days of the incorporation of the LLP along with the following:

1. Copy of the LLP Incorporation Certificate.
2. Copy of the incorporation documents as submitted in Form FiLLiP.

With this final step, the conversion of a Partnership Firm into LLP is over however it must be noted that the registrations, licenses, permits, etc. which were being used to run the business by the old Partnership Firm do not transfer to the LLP. The LLP needs to apply fresh for such.

Other Aspects of Conversion of a Partnership Firm into an Limited Liability Partnership (LLP) in Mumbai, Maharashtra- Documents to be Filed

• A statement by all the partners stating the name, registration number (if any), and the date of registration of the Partnership Firm under the Indian Partnership Act 1932 is filed with the Registrar.
• This statement along with the incorporation documents are filed with the Registrar stating that all the requirements for incorporation of the LLP have been fulfilled. These documents are submitted in a prescribed format and made by a practicing CA, CS, Cost Accountant, or an advocate who deals with the formation of the LLP.

Registration

The Registrar has the right to accept or refuse to register the Limited Liability Partnership. In case the Registrar refuses to register the LLP, the applicants can appeal with the tribunal.

Result of Registration

• The Limited Liability Partnership comes into existence in Mumbai, Maharashtra by the name stated in the certificate of registration.
• All the assets, liabilities, rights, and privileges of the Partnership Firm shall vest in the Limited Liability Partnership.
• The Partnership firm is dissolved, and if the same was registered under the Indian Partnership Act 1932, the name will be removed from the records.
• All the pending legal proceedings against the firm may be enforced against the Limited Liability Partnership as well as any order or judgment be it in favor or against the Partnership Firm may be enforced against the Limited Liability Partnership.
• All existing agreements and contracts of the Partnership Firm as the party shall continue to be in force with the Limited Liability Partnership as the party.
• All existing authority conferred on the Partnership Firm and appointment of the Partnership Firm shall remain conferred on the LLP.

Partners Liability Before Conversion into LLP in Mumbai, Maharashtra

All the partners jointly and severally are liable for all the liabilities and obligations of the Partnership Firm which were standing before conversion.

Conversion Notice

The LLP in its every official correspondence shall provide a statement for 12 months starting within 14 days after the registration, that it was converted from the Partnership Firm to a Limited Liability Partnership and mentioning the name and registration number (if any) of the Partnership Firm. On failing to do so a minimum fine of Rs 10,000 and a maximum fine of Rs 1,00,000 can be imposed. And on continuing default, the minimum fine shall be Rs 50 per day, and the maximum shall be Rs 500 per day.

LLP Form – 17

This form comprises an application (Part A) and the statement (Part B) for the conversion of a Partnership Firm into a Limited Liability Partnership.

Part A: Application

• Service Request Number (SRN) of the Reserve Unique Number (RUN) form if already filed. If not filed then the proposed name of the LLP.
• Name and address of the Partnership Firm.
• Registration details of the Partnership Firm either under the Indian Partnership Act 1932 or under any other law.
• Agreement details about the formation of the Partnership Firm.
• The total number of partners in the Partnership Firm and the total number of partners in the Limited Liability Partnership, which shall be auto-populated.
• Total capital contribution of the firm.
• consent of all partners.
• Details of all partners of the Limited Liability Partnership being shareholders of the company.
• Details of the income tax return filed under the Income Tax Act 1961.
• Details of any pending proceedings in any court / tribunal / any other authority.
• Service Request Number (SRN) and the reason for refusal of any previous conversion application if refused by the Registrar.
• Details of any continuance of any conviction / order / judgment of any court / tribunal / other authority in favor or against the firm.
• Details of secured creditors if any and the consent of all such secured creditors.
• Details of any clearance or approval if required for the conversion of the Partnership Firm into Limited Liability Partnership.

Part B: Statement

Contents of the declaration

Consent by each partner for conversion from the Partnership Firm into Limited Liability Partnership stating

1. That he / she shall be liable both jointly as well as severally for all liabilities as standing before the conversion.
2. That all the rules and regulations of the Limited Liability Partnership Act 2008 have been complied with.
3. That all the partners of the Partnership Firm are the partners of the Limited Liability Partnership and no one else.
4. That all the required approvals for conversion if any have been obtained.
5. That the consent of all secured creditors for conversion has been obtained.
6. That all the information provided in the form is true to the best of his / her knowledge and belief.

Attachments

1. Statement of Assets and Liabilities of the partnership firm duly certified by a practicing CA.
2. Statement of the consent of all the partners of the Partnership Firm.
3. List of all the secured creditors of the Partnership Firm along with their consent for conversion.
4. Acknowledgement copy of the most recent income tax return.
5. Approval if required from any authority or regulatory body.
6. Optional attachment(s) if any.

Other Important Points

• E-forms are digitally signed by designated partner/s with details of his DIN / DPIN and PAN number in case the designated partner/s do not have a DIN.
• The certifications are done practicing Chartered Accountant / Company Secretary / Cost accountant.
• Membership number or certificate of practice number is provided of the associate or fellow.

Generally, this entire procedure of conversion of Partnership firm into a Limited Liability Partnership (LLP) along with government processing time should take around 20 days in