Step-by-Step Guide
6 Steps
How to Convert a Partnership Firm to LLP in India
Complete step-by-step guide to converting a Partnership Firm to an LLP in India in 2026. Covers eligibility, Section 56-58 of LLP Act 2008, filing Form 17 on MCA portal, tax-neutral transfer under Section 47(xiiib), partner consent, compliance requirements, and post-conversion obligations.
Quick Overview
Estimated Cost
₹10000
Time Required
15 to 30 Days
Total Steps
6 Steps
What You'll Need
Documents Required
- Registered Partnership Deed of the existing partnership firm
- Consent of all partners for conversion to LLP (in writing)
- Statement of assets and liabilities of the partnership firm certified by a Chartered Accountant
- List of all partners with their names, addresses, and profit-sharing ratios
- PAN Card and Aadhaar Card of all partners
- Proof of registered office address (rental agreement, utility bill, NOC from owner)
- Income tax returns of the partnership firm for the last 2-3 years
- Digital Signature Certificate (DSC) for all designated partners
- LLP Agreement to be executed after conversion
Tools & Prerequisites
- Internet access for the MCA V3 portal at mca.gov.in
- Valid Digital Signature Certificate (DSC) registered on MCA portal for designated partners
- GST portal access for registration amendment or new registration
- Chartered Accountant for preparing the certified statement of assets and liabilities
- Company Secretary for drafting the LLP Agreement and handling MCA filings
Converting a Partnership Firm to a Limited Liability Partnership (LLP) is one of the most straightforward and beneficial business structure upgrades available under Indian law. Unlike other conversions that require incorporating a new entity and transferring assets, the partnership-to-LLP conversion is a direct statutory conversion under the LLP Act 2008 where all assets, liabilities, and contracts automatically vest in the new LLP by operation of law.
This guide covers the complete conversion process from eligibility verification to Form 17 filing on the MCA portal, tax implications under Section 47(xiiib) of the Income Tax Act, and post-conversion compliance requirements. Whether you are a professional firm, a trading business, or a family-run partnership looking to upgrade, this step-by-step guide will help you convert smoothly and cost-effectively.
Why Convert a Partnership Firm to an LLP
A traditional partnership firm exposes partners to unlimited personal liability for all business debts and obligations. As the business grows, this becomes a significant risk. An LLP provides the same operational flexibility as a partnership but with the crucial benefit of limited liability protection.
| Feature | Partnership Firm | LLP |
|---|---|---|
| Liability | Unlimited - personal assets at risk | Limited to contribution in the LLP |
| Legal Status | Not a separate legal entity in all contexts | Separate legal entity recognized by law |
| Perpetual Succession | No - dissolution on death or retirement of partner | Yes - continues regardless of partner changes |
| Compliance | Minimal but no limited liability | Two annual filings (Form 8 and Form 11) |
| Audit Requirement | If turnover exceeds 1 crore (tax audit) | If turnover exceeds 40 lakh or contribution exceeds 25 lakh |
| Maximum Partners | 50 partners (for banking firms, 10) | No maximum limit |
| Foreign Partners | Generally not allowed | Allowed subject to FEMA regulations |
| Bank Loans | Personal guarantees always required | LLP can borrow in its own name |
The partnership-to-LLP conversion is ideal for professional firms (CAs, lawyers, architects, consultants), family businesses operating as partnerships, and trading firms that want limited liability without the compliance overhead of a Private Limited Company. If you need to raise equity funding from external investors, consider converting to a Private Limited Company instead.
Eligibility Requirements for Conversion
Before filing for conversion, ensure the partnership firm meets these mandatory requirements under the Third Schedule of the LLP Act 2008:
- The firm must be registered under the Indian Partnership Act 1932. Unregistered firms must first register with the Registrar of Firms before initiating conversion
- All partners must consent to the conversion in writing. Unanimous agreement is mandatory
- All partners must become LLP partners. No existing partner can be excluded from the conversion
- There should be no legal proceedings that would prevent the conversion (court orders restraining the firm from changing its structure)
- The firm must have at least 2 partners. An LLP requires a minimum of 2 partners, including at least 2 designated partners
If your partnership firm is not registered with the Registrar of Firms, you cannot file Form 17 for conversion. You must first register the firm under the Indian Partnership Act 1932 by submitting the partnership deed and application to the Registrar of Firms in your state. Registration typically takes 15-30 days. Only after registration can you proceed with the LLP conversion. See our partnership registration guide for details.
Step-by-Step Conversion Process
Step 1: Document Partner Consent and Prepare Resolution
Call a partners' meeting and pass a formal resolution agreeing to the conversion. The resolution should specify:
- Consent of all partners for conversion from partnership to LLP
- Proposed name of the LLP (usually the firm name + 'LLP' suffix)
- List of designated partners (minimum 2)
- Authorization for a specific partner to handle the MCA filing
- Confirmation that the capital contribution and profit-sharing ratio will remain the same (important for tax exemption)
Step 2: Obtain DSCs and DPINs
All designated partners must have:
- A valid Digital Signature Certificate (DSC) - apply from an authorized Certifying Authority
- A DPIN or DIN - if a partner already has a DIN from being a company director, it works as DPIN. Otherwise, apply for DPIN through the DIN/DPIN application process
- Registration of DSC on the MCA V3 portal
Step 3: Prepare the Statement of Assets and Liabilities
A Chartered Accountant must prepare and certify a statement of the firm's assets and liabilities as on a date not earlier than 30 days before the date of filing Form 17. This statement includes:
- All fixed assets with their book values
- Current assets (cash, bank balances, receivables, inventory)
- All liabilities (loans, payables, outstanding expenses)
- Capital accounts of all partners
- Any reserves or accumulated profits
Step 4: File Form 17 on the MCA Portal
- Log in to the MCA V3 portal at mca.gov.in
- Navigate to MCA Services > LLP Forms > Form 17
- Fill in details of the existing partnership firm:
- Name and registration number of the firm
- Date of registration with Registrar of Firms
- Registered office address
- Names, addresses, and PAN of all partners
- Profit-sharing ratio of all partners
- Fill in details of the proposed LLP:
- Proposed name of the LLP
- Registered office address
- Details of all designated partners (name, DPIN, address)
- Total contribution of partners
- Upload required documents:
- Registered partnership deed
- Written consent of all partners
- CA-certified statement of assets and liabilities
- Proof of registered office (rental agreement + NOC + utility bill)
- Identity and address proof of all partners
- Sign using DSC of designated partners
- Pay the government fee
- Submit and note the SRN for tracking
Step 5: Receive Certificate of Registration
The ROC reviews the application and, if satisfied that all requirements are met, issues the Certificate of Registration. This certificate:
- Confirms the LLP is now registered
- Assigns the LLPIN (LLP Identification Number)
- Automatically dissolves the partnership firm
- Triggers the automatic vesting of all assets, liabilities, rights, and obligations in the LLP
Unlike proprietorship-to-company conversions where you need a separate Business Transfer Agreement, the partnership-to-LLP conversion under the LLP Act provides automatic vesting by operation of law. No transfer deeds, assignment agreements, or stamp duty on asset transfer is required. This is a significant advantage that makes the process simpler and more cost-effective.
Step 6: File LLP Agreement in Form 3
Within 30 days of receiving the Certificate of Registration, file the LLP Agreement in Form 3 on the MCA portal. The LLP Agreement should cover:
- Name and registered office of the LLP
- Details of all partners and their contribution amounts
- Profit-sharing ratio
- Roles and responsibilities of designated partners
- Decision-making process and voting rights
- Admission and retirement of partners
- Dispute resolution mechanism
- Winding-up provisions
Tax Implications of Partnership to LLP Conversion
Capital Gains Exemption Under Section 47(xiiib)
The conversion can be completely tax-neutral if the following conditions are satisfied:
| Condition | Requirement | Duration |
|---|---|---|
| Asset transfer | All assets and liabilities must transfer to the LLP | At the time of conversion |
| Partners | All partners must become LLP partners | At the time of conversion |
| Profit-sharing ratio | Must remain the same as in the partnership | For 5 years from conversion |
| Consideration | Partners must not receive any consideration other than capital account balance and profit share | At the time of conversion |
| Turnover limit | Total sales/turnover must not exceed 60 lakh rupees in any of the preceding 3 financial years | 3 years before conversion |
The 60 lakh rupees turnover limit is often overlooked. If the partnership firm's turnover exceeded 60 lakh in any of the 3 years before conversion, the conversion can still proceed legally, but the capital gains tax exemption will not apply. Discuss the tax implications with your CA before proceeding if turnover is near or above this threshold.
GST on Conversion
Since the conversion is a statutory transfer by operation of law, it is generally not treated as a supply under GST. However, you must update the GST registration to reflect the new LLP entity type and PAN. File an application for amendment of registration on the GST portal.
Post-Conversion Action Items
| Action | Timeline | Details |
|---|---|---|
| File LLP Agreement (Form 3) | Within 30 days | File on MCA portal with DSC of designated partners |
| Obtain PAN for the LLP | Within 15 days | Apply if not automatically generated during conversion |
| Update bank accounts | Within 15 days | Change entity name, PAN, and authorized signatories |
| Update GST registration | Within 15 days | Amend registration on GST portal for new entity type |
| Update MSME/Udyam registration | Within 30 days | Cancel old registration, apply for new one in LLP name |
| Update all contracts and agreements | Within 30 days | Inform all clients, vendors, and partners |
| Update insurance policies | Within 30 days | Change entity name on all business insurance policies |
| File DIR-3 KYC | Before September 30 | Annual KYC for all designated partners |
| Inform Registrar of Firms | Within 30 days | Send copy of Certificate of Registration |
Government Fees for Conversion
| Total Contribution of Partners | Government Fee |
|---|---|
| Up to 1 lakh rupees | 50 rupees |
| 1 lakh to 5 lakh rupees | 100 rupees |
| 5 lakh to 10 lakh rupees | 150 rupees |
| Above 10 lakh rupees | 200 rupees |
Common Mistakes to Avoid
- Not registering the partnership firm first: Only registered partnership firms can be converted. If your firm is unregistered, register it before initiating conversion
- Changing profit-sharing ratio within 5 years: If you change the ratio within 5 years of conversion, the capital gains tax exemption under Section 47(xiiib) is revoked retroactively. Maintain the same ratio for the full 5-year period
- Exceeding the 60 lakh turnover threshold without tax planning: If your firm's turnover exceeded 60 lakh in any of the 3 preceding years, plan for potential capital gains tax with your CA before converting
- Delaying the LLP Agreement filing: Form 3 must be filed within 30 days. A penalty of 100 rupees per day applies for late filing. Draft the LLP Agreement before or during the conversion process so it is ready for immediate filing
- Not updating all registrations: GST, PAN, bank accounts, MSME, and all licenses must be updated to the LLP's name. Operating with old registrations can create compliance and legal issues
- Forgetting DIR-3 KYC: All designated partners must file DIR-3 KYC by September 30 every year. Non-filing leads to DPIN deactivation and a 5,000 rupees penalty per partner
Conclusion
Converting a Partnership Firm to an LLP is one of the most efficient business structure upgrades available in India. The direct statutory conversion under the LLP Act ensures automatic vesting of all assets and liabilities, no stamp duty on asset transfer, and potential tax-neutral treatment under Section 47(xiiib). The process typically takes 15-30 working days and costs between 10,000-25,000 rupees (including professional fees).
The most important considerations are ensuring all partners consent unanimously, maintaining the same profit-sharing ratio for 5 years (for tax exemption), and promptly filing the LLP Agreement within 30 days of registration. With these handled properly, your partnership firm transitions smoothly into a modern LLP structure with limited liability protection and enhanced credibility.
If you need help with the complete conversion process - from eligibility verification and Form 17 filing to LLP Agreement drafting and post-conversion compliance setup - the IncorpX team can manage every step for you.
Frequently Asked Questions
What is the legal basis for converting a Partnership Firm to an LLP?
The conversion of a Partnership Firm to an LLP is governed by Sections 56, 57, and 58 of the LLP Act 2008 read with the Third Schedule of the Act. Section 56 provides the mechanism for conversion, Section 57 deals with the effects of conversion (automatic transfer of assets and liabilities), and Section 58 provides for the registration formalities. The Third Schedule lists the conditions and requirements that must be fulfilled for the conversion.
Can only registered partnership firms be converted to LLP?
Yes, only a registered partnership firm under the Indian Partnership Act 1932 can be converted to an LLP. An unregistered partnership firm must first register with the Registrar of Firms in the relevant state before initiating the conversion to LLP. Registration of a partnership firm typically takes 15-30 days and requires the partnership deed, application form, and prescribed fees. Once registered, the conversion process can begin.
Do all partners need to agree for the conversion?
Yes, unanimous consent from all partners is mandatory. Every partner of the existing partnership firm must agree to the conversion and become a partner in the resulting LLP. If even one partner disagrees, the conversion cannot proceed. If any partner wants to exit, they must formally retire from the partnership (by executing a retirement deed and amending the partnership deed) before the conversion application is filed. The consent must be documented in writing.
What happens to the partnership firm after conversion?
Upon the Registrar issuing the Certificate of Registration, the partnership firm is deemed dissolved. It ceases to exist as a legal entity. The dissolution happens automatically by operation of law and does not require a separate dissolution deed or notification to the Registrar of Firms. All references to the firm in any contracts, agreements, or legal proceedings are deemed to be references to the new LLP from the date of conversion.
Do assets and liabilities automatically transfer to the LLP?
Yes, under Section 57 of the LLP Act, all assets, liabilities, rights, interests, and obligations of the partnership firm automatically vest in the LLP from the date of registration. No separate transfer deeds, assignment agreements, or conveyance documents are required. This includes movable and immovable property, contracts, intellectual property, and pending receivables. This automatic vesting is one of the key advantages of this statutory conversion route.
Is there any tax exemption for this conversion?
Yes, the conversion is tax-neutral under Section 47(xiiib) of the Income Tax Act 1961. The transfer of assets from the partnership firm to the LLP is not treated as a taxable transfer, provided the following conditions are met: (a) all assets and liabilities are transferred to the LLP, (b) all partners become partners of the LLP with the same capital contribution and profit-sharing ratio, (c) the partners do not receive any consideration other than their capital account balance and profit share, (d) the aggregate profit-sharing ratio of partners remains the same for 5 years, and (e) the total sales, turnover, or gross receipts of the firm did not exceed 60 lakh rupees in any of the preceding 3 years. If the turnover exceeds 60 lakh, the conversion may still proceed but capital gains tax may apply.
What is the turnover limit for tax-free conversion?
For the capital gains exemption under Section 47(xiiib), the partnership firm's total sales, turnover, or gross receipts should not have exceeded 60 lakh rupees in any of the 3 financial years preceding the year of conversion. If turnover exceeds this limit, the conversion from partnership to LLP can still be done legally (the LLP Act does not have this restriction), but the tax exemption will not apply and capital gains tax may be payable on the transfer of assets.
What is the government fee for conversion?
The government fee for filing Form 17 depends on the total contribution of partners in the proposed LLP. For contribution up to 1 lakh rupees, the fee is 50 rupees. For 1 lakh to 5 lakh, it is 100 rupees. For 5 lakh to 10 lakh, it is 150 rupees. For above 10 lakh, it is 200 rupees. Additionally, the LLP Agreement filing (Form 3) costs 50 to 200 rupees depending on contribution. Professional fees for CA and CS assistance typically range from 5,000 to 15,000 rupees.
What is Form 17 and what details does it contain?
Form 17 is the official application form for converting a partnership firm into an LLP filed on the MCA portal. It contains: details of the existing partnership firm (name, registration number, date of registration, registered office), details of all existing partners with their addresses and profit-sharing ratios, details of the proposed LLP (name, registered office, proposed designated partners), a statement of assets and liabilities certified by a CA, consent of all partners, and a declaration that all requirements of the Third Schedule have been complied with.
What documents are attached to Form 17?
The following documents are attached to Form 17: registered partnership deed, written consent of all partners, statement of assets and liabilities certified by a Chartered Accountant, proof of registered office address (rental agreement, NOC, utility bill), PAN and address proof of all partners, copy of firm registration certificate from the Registrar of Firms, details of pending legal proceedings (if any), and a declaration by designated partners that all requirements for conversion have been met.
How long does the conversion process take?
The conversion typically takes 15 to 30 working days from filing Form 17. The breakdown is: DSC and DPIN procurement (3-5 days if not already held), preparation of documents and CA certification (3-5 days), Form 17 filing and processing by ROC (7-15 working days), LLP Agreement filing in Form 3 (within 30 days of registration), and post-conversion license and registration updates (7-15 days). The ROC processing time depends on the workload at the specific ROC office.
Can the LLP use the same name as the partnership firm?
The LLP can use the same name as the partnership firm with the addition of 'LLP' at the end. For example, 'Sharma & Associates' can become 'Sharma & Associates LLP'. The name must be available on the MCA portal and should not be identical or similar to any existing company or LLP name. Name availability is checked during the Form 17 filing process. If the exact name is not available, you can propose an alternative name.
What happens to the partnership firm's PAN after conversion?
The partnership firm's PAN does not automatically transfer to the LLP. The LLP receives its own PAN and TAN which may be allotted during or after the conversion process. You need to apply for PAN in the LLP's name if it is not allotted automatically. After obtaining the LLP's PAN, update all registrations, bank accounts, and tax filings to reflect the new PAN. The firm's PAN should be surrendered after all pending tax filings are completed.
How does the conversion affect existing bank accounts?
Existing bank accounts of the partnership firm need to be transferred to the LLP's name. Visit the bank with the Certificate of Registration, LLP Agreement, board resolution (if required), PAN of the LLP, and KYC documents of designated partners. Most banks will convert the existing account to the LLP's name rather than requiring a new account. If the bank does not support transfer, open a new account in the LLP's name and transfer all balances.
Is the LLP Agreement different from the Partnership Deed?
Yes, they are fundamentally different documents. The Partnership Deed governs a partnership under the Indian Partnership Act 1932, while the LLP Agreement governs the LLP under the LLP Act 2008. The LLP Agreement must be freshly drafted to include provisions specific to LLPs such as: designated partner roles and responsibilities, contribution obligations, profit-sharing mechanism, dispute resolution, admission and exit of partners, winding-up provisions, and indemnification clauses. The LLP Agreement must be filed on the MCA portal within 30 days of conversion.
What if one partner wants to retire before conversion?
If a partner wants to retire before conversion, they must execute a retirement deed, amend the partnership deed to remove their name, file the amendment with the Registrar of Firms, settle their capital account and profit share, and obtain a no-dues certificate. Only after the retirement is formally completed can the remaining partners proceed with the conversion. The retiring partner has no claim on the LLP that is formed after conversion.
Can a minor partner in the firm become a partner in the LLP?
No, a minor cannot be a partner in an LLP. While the Indian Partnership Act 1932 allows minors to be admitted to the benefits of a partnership, the LLP Act 2008 requires all partners to be at least 18 years old and mentally competent. If the partnership firm has a minor admitted to the benefits, the minor must be removed from the partnership before the conversion. The minor can be admitted as a partner in the LLP after attaining the age of 18.
Does the conversion affect existing contracts with third parties?
No, existing contracts remain valid and enforceable after conversion. Under Section 57 of the LLP Act, all contracts, agreements, and arrangements entered into by the partnership firm continue in force and are enforceable by or against the LLP as if entered into by the LLP itself. No separate novation or assignment is needed. However, it is good practice to inform all clients, vendors, and service providers about the conversion and provide the LLP's new registration number and PAN.
What are the compliance requirements after conversion?
After conversion, the LLP must comply with: file Form 11 (Annual Return) by May 30 each year, file Form 8 (Statement of Account and Solvency) by October 30 each year, file DIR-3 KYC for all designated partners by September 30, file income tax return (by July 31 if not audited, by October 31 if audited), get accounts audited by CA if turnover exceeds 40 lakh or contribution exceeds 25 lakh, and maintain books of accounts at the registered office. For a complete guide, see our LLP annual return filing guide.
What GST changes are needed after conversion?
You need to update the GST registration to reflect the new LLP entity. On the GST portal, file an application for amendment of core fields to change the entity type from 'Partnership' to 'LLP', update the PAN, update the trade name, and update the authorized signatory details. Alternatively, if the GSTN does not allow direct amendment, cancel the old GST and apply for fresh GST registration in the LLP's name. Ensure there is no break in GST compliance during the transition.
Is stamp duty payable on the conversion?
Since the assets and liabilities vest automatically in the LLP by operation of law (Section 57), separate conveyance or transfer deeds are not executed. Therefore, stamp duty on asset transfer is generally not applicable. However, stamp duty may apply on the LLP Agreement which varies by state (typically 500-5,000 rupees or a percentage of total contribution). Check with your state's stamp duty schedule for the exact rates applicable to LLP Agreements.
Can a partnership firm with immovable property be converted?
Yes, a partnership firm owning immovable property can be converted to an LLP. The property automatically vests in the LLP under Section 57. However, you must update the property records and registration with the local Sub-Registrar to reflect the LLP as the new owner. This typically requires presenting the Certificate of Registration, a certified copy of the LLP Agreement, and a mutation application. Some states may charge a nominal mutation fee.
What if the partnership firm has pending litigation?
Pending litigation does not prevent conversion. Under Section 57 of the LLP Act, any legal proceedings pending by or against the partnership firm may be continued by or against the LLP. No substitution application is required - the proceedings automatically continue with the LLP stepping into the firm's shoes. However, it is advisable to inform the courts and opposing parties about the conversion and place the Certificate of Registration on record.
What is the effect on the firm's employees?
Employees of the partnership firm automatically become employees of the LLP. Their terms of employment, including salary, designation, tenure, and benefits, remain unchanged. The LLP must update payroll records, PF and ESI registrations, and TDS deductions to reflect the LLP's PAN and TAN. Issue updated appointment letters or addendums referencing the LLP as the employer. Ensure continuity of service for benefits like gratuity and leave encashment.
How does the conversion affect the firm's profit history for bank loans?
The LLP can carry forward the partnership firm's financial history since it is a statutory conversion. Banks typically recognize the continuity and consider the firm's past financials, credit history, and bank statements when the LLP applies for loans. Present the Certificate of Registration, LLP Agreement, and a CA-certified statement showing the firm's financial history being continued by the LLP. Most banks accept this continuity for credit assessment purposes.
Can an LLP be converted back to a Partnership Firm?
No, there is no provision under Indian law to convert an LLP back into a Partnership Firm. The conversion under Section 56 of the LLP Act is a one-way process. If the partners wish to operate as a traditional partnership, the only option is to close the LLP (through voluntary winding up or strike-off) and form a new partnership firm. This would require fresh registration, new partnership deed, and new bank accounts.
What happens to the firm registration number after conversion?
After conversion, the partnership firm's registration number with the Registrar of Firms becomes inactive. The firm is deemed dissolved and the registration ceases to have effect. The LLP receives its own unique LLP Identification Number (LLPIN) from the MCA which is used for all future filings, contracts, and regulatory purposes. The LLPIN is an alphanumeric code assigned at the time of conversion registration.
Can a partnership firm convert directly to a Private Limited Company instead?
Yes, a partnership firm can also be converted to a Private Limited Company. However, the processes are different. Partnership to LLP conversion is a direct statutory conversion under the LLP Act with automatic vesting of assets and liabilities. Partnership to company conversion requires incorporating a new company and then transferring the business through a business transfer agreement. The choice depends on whether you prefer the simpler compliance of an LLP or the funding and credibility advantages of a company.
What is the minimum number of partners required for conversion?
An LLP requires a minimum of 2 partners, and at least 2 must be designated partners. Since the conversion requires all existing partners to become LLP partners, the partnership firm must have at least 2 partners. There is no maximum limit on the number of partners in an LLP. At least one designated partner must be a resident of India (stayed in India for 182 days in the previous calendar year).
Can the profit-sharing ratio change after conversion?
For the capital gains tax exemption under Section 47(xiiib), the profit-sharing ratio must remain the same for at least 5 years from the date of conversion. If the ratio is changed within this period, the tax exemption is revoked and capital gains tax becomes payable for the year of conversion. After 5 years, the partners can amend the LLP Agreement to change the profit-sharing ratio without any tax implications.
What reporting is required to the Registrar of Firms after conversion?
You should inform the Registrar of Firms about the conversion by providing a copy of the Certificate of Registration issued by the Registrar of Companies. The Registrar of Firms notes the dissolution of the partnership firm in their records. While this notification is not always explicitly mandated by statute, it ensures the firm's registration is formally marked as closed and prevents any confusion in future legal proceedings.
What are the advantages of LLP over a Partnership Firm?
The key advantages include: limited liability protection (partners' personal assets are protected), separate legal entity status, no maximum limit on partners, lower compliance costs compared to a company, no mandatory audit if turnover is below 40 lakh and contribution is below 25 lakh, easier admission and exit of partners, better credibility with banks and government agencies, and perpetual succession (the LLP continues regardless of changes in partnership). The conversion is a natural upgrade for any growing partnership firm.
How do I handle ongoing projects during the transition period?
Ongoing projects continue seamlessly since all contracts vest in the LLP by operation of law. However, for practical purposes: inform all clients about the conversion, update invoicing details (new GSTIN, PAN, and bank account of the LLP), issue revised purchase orders if needed, and ensure no gap in insurance coverage. The transition should be transparent and clients should receive formal written communication about the change. No new contracts or agreements need to be executed for ongoing engagements.
Is there a time limit for filing Form 3 (LLP Agreement) after conversion?
Yes, the LLP Agreement must be filed in Form 3 within 30 days of the date of registration (conversion). Late filing attracts a penalty of 100 rupees per day of delay. If no LLP Agreement is filed, the provisions of the First Schedule of the LLP Act apply by default, which may not be suitable for your specific partnership arrangement. The LLP Agreement is a critical document that governs the partner relationship - do not delay its execution and filing.
What if the firm has foreign partners or NRI partners?
Foreign nationals and NRIs can be partners in an LLP formed by conversion, subject to FEMA and RBI regulations. At least one designated partner must be a resident of India. Foreign partners need a valid DSC from an Indian Certifying Authority and a DPIN from MCA. If the LLP receives foreign investment, it must comply with FDI regulations and file necessary reports with the RBI. The conversion itself is not affected by foreign partners, but the post-conversion compliance is slightly more complex.
What is the role of a Chartered Accountant in the conversion process?
A CA plays multiple critical roles: certifying the statement of assets and liabilities that is filed with Form 17, advising on the tax implications of the conversion (Section 47(xiiib) compliance), ensuring the valuation of assets is proper, helping with PAN application and income tax return filing during the transition year, advising on GST transition, and structuring the conversion to be tax-neutral. Engaging a competent CA is strongly recommended for any partnership-to-LLP conversion.
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