Proprietorship to LLP

Proprietorship to Limited Liability Partnership

Convert proprietorship to LLP to leverage on added benefits with limited liability. The basic concept behind adopting LLP was to provide a structure that is easy to maintain and reduces the liability as compared to a sole proprietorship structure

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Benefits of conversion from proprietorship to LLP

Separate Legal Existence

Limited liability partnership is a separate legal entity, and its existence is separate from its partners, unlike the general partnership firm. This makes it possible to own assets and enter into contracts in the name of the LLP or sue a third party in case of any dispute

Limited Liability of Owners

The liability of Partners is limited to the extent of capital contribution agreed by the partners in the LLP Agreement. The loss or debt of LLP cannot be assigned to partners even while the dissolution of LLP. Further, one partner is not held responsible for the actions of negligence or misconduct of any other partner

Lower Compliance Requirement

Compared to a Private Company, there is a lower compliance requirement in case of LLP, including the audit requirement. The requirement of statutory audit arises on reaching a certain level of turnover or contribution. Further, provisions such as the meeting of partners, operation through resolutions are relaxed and not mandatory in every case.

Flexibility to Operate

The LLP is managed and run according to the LLP agreement. It’s the partners that decide how the LLP would function and divide the duties and responsibilities. Hence, it is a very flexible structure and the partners are free to create their own rules of management which is not possible in other business structures.

Change from Proprietorship to LLP

In India, limited liability partnerships were established under the LLP Act, 2008. The fundamental idea behind the adoption of an LLP structure was to offer a simple to maintain structure that limits liability in comparison to a sole proprietorship structure. LLP provides a hybrid structure and combines the benefits of both company and partnership firms into a single form of organisation. Therefore, changing from a sole proprietorship to an LLP is a wise business move. In an LLP, one partner is not accountable or liable for the wrongdoing or carelessness of another partner. Limited liability protection against the LLP’s obligations is another benefit of an LLP for the owners.

Documents Required

List of Documents that are required to proceed with this service package are

Pancard

PAN card copy of the Director and Shareholder.

Passport Copy/Bank Statement

Passport copy or Bank statement of the Directors and Shareholders

Registered Office Proof

Proof of registered office, Updated gas or electricity bill or Property tax receipt

Director’s Address Proof

Copy of rental agreement and no objection certificate from the owner

Identity Proof

Photo ID proof of director – Voter ID or Passport or License

Rent Agreement

Rent Agreement of the registered office should be provided, if any

Frequently Asked Questions

What are the key requirements/factors for registering an LLP?

Like all partnerships registration requires two or more individuals to be the designated partners, one partner being an Indian national. The registered place of business has to be in India.

Are there any limitations on being a partner when converting sole proprietorship to LLP?

The LLP Act, 2008 does not put any limitations in terms of citizenship or residency to be a Partner. Foreign Nationals, including Foreign Companies & LLPs, are allowed to incorporate LLP in India provided at least one of the Designated Partners is resident of India. However, the person should be of age 18 years or above i.e. not a minor and competent to enter into a contract. Also, the proposed Designated Partner shall have DIN.

Do I need to apply for a fresh registration in the name of LLP or amend the registrations in the name of Proprietorship Firm?

The registered trademark is valid for a period of 10 years from the date of application registration. It can be renewed every 1The process for conversion of proprietorship into LLP shall be filed with the concerned department as registrations in the name of Proprietorship Firm cannot be amended. All the registrations are taken in the name of Proprietorship, if not required for any other purpose, shall be surrendered.0 years, perpetually. In India, renewal request is to be filed within Six months before the expiry of the last registration of trademark.

Can LLP carry on more than one business activities?

YES, under LLP one can carry more than one business, provided, the businesses are related or are of the same nature. Unrelated activities such as fashion Designing and Accountancy cannot be carried under the same LLP. The business activities are mentioned in the agreement and must be approved from RoC.

What are the statutory compliance required for a registering a Limited Liability Partnership?

Once the Limited liability partnership is incorporated, it shall comply with the annual compliance requirements. In case the capital contribution of the LLP is less than ₹25 lakhs or has a turnover of less than ₹40 lakhs, the financial statements are not required to be audited. To know more details, please read our blog post “Mandatory Compliances for a Limited Liability Partnership (LLP)

Whether LLP can be registered for Not-for-profit activities?

Profit making is an essential condition for an LLP; hence LLPs cannot be incorporated for undertaking non-profit activities.

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