Introduction

A Partnership Firm is a common business structure in India, but as businesses grow, partners often seek more benefits such as limited liability, legal recognition, and lesser compliance burdens. A Limited Liability Partnership (LLP) offers these advantages while maintaining the flexibility of a traditional partnership.

This guide provides a step-by-step process to convert a Partnership Firm into an LLP, covering the legal requirements, necessary documents, and compliance formalities.

1. Why Convert a Partnership Firm into an LLP?

While both a Partnership Firm and an LLP operate on a similar structure, there are key differences that make LLPs a better option for growing businesses.

A. Advantages of Converting into an LLP

✅ Limited Liability – Unlike a partnership where partners are personally liable for debts, an LLP offers protection of personal assets.
✅ Legal Recognition – LLPs are governed by the Limited Liability Partnership Act, 2008, providing them legal credibility in business transactions.
✅ Separate Legal Entity – An LLP can own property, enter contracts, and sue or be sued in its own name.
✅ Lesser Compliance Burden – Unlike Private Limited Companies, LLPs have fewer reporting and auditing requirements.
✅ Tax Benefits – LLPs are not subject to Dividend Distribution Tax (DDT), reducing tax liability.

B. When Should a Business Convert to an LLP?

✔ If the business is growing and partners want limited liability
✔ If the firm wants legal recognition to attract investors and banks
✔ If the partners want to avoid unlimited liability in disputes

2. Pre-Conversion Checklist: Eligibility Criteria for LLP Conversion

Before applying for conversion, a Partnership Firm must ensure:

🔹 The firm has at least two partners (as an LLP needs a minimum of two designated partners).
🔹 All partners agree to the conversion and must be designated partners in the LLP.
🔹 The firm is registered under the Partnership Act, 1932.
🔹 No partner should be disqualified under Section 5 of the LLP Act, 2008.
🔹 The firm has filed all pending tax returns and financial statements.

3. Step-by-Step Process to Convert a Partnership Firm into an LLP

Step 1: Obtain Digital Signature Certificates (DSC) for Partners

• Since all LLP registrations are done online, all partners must obtain DSC (Class 3).
• This is required to digitally sign the incorporation documents.

Processing Time: 1-2 working days

Step 2: Apply for Director Identification Number (DIN) for Partners

• Each designated partner must obtain a DIN/DPIN (Designated Partner Identification Number) through Form DIR-3.
• The DIN must be approved by the Ministry of Corporate Affairs (MCA).

Processing Time: 2-3 working days

Step 3: Name Approval for the LLP

• The firm must apply for a unique LLP name through RUN-LLP (Reserve Unique Name) on the MCA portal.
• The name must comply with LLP Naming Guidelines and end with “LLP”.

Processing Time: 2-5 working days

Step 4: File LLP Incorporation Documents (FiLLiP Form)

• The partners must file FiLLiP (Form for Incorporation of LLP), which includes:
  ✅ Details of the Partners & LLP Agreement
  ✅ Address Proof & Registered Office Documents
  ✅ Subscription Sheet (Signed by All Partners)

• The MCA verifies the documents and issues an LLP Incorporation Certificate.

Processing Time: 7-10 working days

Step 5: File Form 17 for Conversion of Partnership into LLP

• The firm must file Form 17 (Application for Conversion) along with:
  ✅ Consent of all partners for conversion
  ✅ Statement of assets and liabilities of the partnership firm
  ✅ Acknowledgment of latest Income Tax Return (ITR)
  ✅ List of secured creditors (if any)

• After verification, the MCA issues an LLP Registration Certificate confirming the conversion.

Processing Time: 10-15 working days

Step 6: Draft and File LLP Agreement

• Once incorporated, the LLP must draft an LLP Agreement, which includes:
  ✅ Profit-sharing ratio
  ✅ Roles and responsibilities of partners
  ✅ Rights and duties of partners

• The LLP Agreement must be filed with Form 3 within 30 days of incorporation.

Step 7: Apply for PAN, TAN, and GST Registration

• Since LLPs are treated as separate legal entities, they need a new PAN and TAN.
• If the firm was already registered under GST, it must apply for GST migration.

4. Post-Conversion Compliance Requirements for LLP

After conversion, the LLP must comply with the following annual requirements:

✅ Annual Return Filing (Form 11) – Due by May 30
✅ Statement of Accounts & Solvency (Form 8) – Due by October 30
✅ Income Tax Return (ITR-5) – Due by July 31 (Non-Audited) / October 31 (Audited)
✅ GST Filings (If Applicable) – Monthly/Quarterly Returns

5. Taxation Rules for LLPs After Conversion

LLPs are taxed under the Income Tax Act, 1961 at a flat rate of 30% on profits.

• No Dividend Distribution Tax (DDT) – Unlike companies, LLPs do not pay DDT.
• Tax Audit – LLPs with a turnover above ₹1 crore require a mandatory tax audit.
• GST Rules – LLPs with turnover above ₹20 lakh (₹40 lakh for goods) must register under GST and file returns.

6. Penalties for Non-Compliance in LLPs

Failing to meet LLP compliance requirements can lead to:

🚨 Late Fee of ₹100 per day for MCA filings
🚨 Penalty of ₹25,000 – ₹5 lakh for non-filing of Form 8 & 11
🚨 Striking Off of LLP by MCA after two consecutive years of non-filing
🚨 Personal Liability of Partners for legal non-compliance

7. Why Choose ASK ASSOCIATES for LLP Conversion?

🔹 Hassle-Free LLP Registration & Conversion – We handle everything from name approval to LLP Agreement drafting.
🔹 Affordable Pricing & Expert Consultation – We ensure the process is cost-effective.
🔹 GST & Tax Compliance Support – From tax filings to GST registrations, we provide end-to-end assistance.
🔹 Dedicated Compliance Team – We ensure your LLP remains compliant year-round.

🚀 Contact ASK ASSOCIATES today for a seamless conversion from Partnership to LLP! 🚀