Introduction
Thinking of converting your Private Limited Company into a Limited Liability Partnership (LLP)? You’re not alone—many small business owners in India are making this shift to enjoy simplified compliance, flexible management, and potential tax savings.
In this article from Manika TaxWise, we’ll dive deep into the step-by-step process, eligibility criteria, real-life examples, and practical tips to ensure your conversion is smooth, legal, and fully compliant. Let’s break it down in everyday language so even a beginner can follow along!
1. Why Convert to an LLP?
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Simplified Compliance: LLPs have fewer regulatory obligations than companies—no need for board meetings or complex audits unless turnover exceeds thresholds.
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Flexible Profit Sharing: You decide partner roles and profit distribution—standardization isn’t mandatory.
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Tax Efficiency: LLPs avoid Dividend Distribution Tax (DDT), and conversion doesn’t trigger capital gains tax under several conditions
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Limited Liability: Partners’ risk is capped at their contribution—personal assets are shielded.
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Ideal for Small Businesses: With low turnover and investment, LLP saves money on compliance while maintaining legitimacy.
2. Who Is Eligible?
Ensure your Private Limited Company meets these key criteria:
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It's unlisted with no secured loans or charges on assets
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All shareholders must unanimously agree and become partners
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All corporate filings, including latest ITR, annual returns, and ROC forms must be up to date
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Consent from all creditors, including unsecured lenders
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Company hasn't faced prosecution, pending litigation, or unresolved forms .
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Post-conversion, must have at least 2 partners, 2 designated partners, and one must be an Indian resident
Companies ineligible for conversion:
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Entities in banking, finance, insurance, or those with FDI or asset-backed loans caindelhi.in.
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Section 8 (non-profit) companies.
3. Required Documents Checklist
| Purpose | Documents |
|---|---|
| Identity & Address Proof | PAN & Aadhaar/passport/driver’s license |
| Registered Office | Utility bill (≤2 months old), NOC from owner |
| Shareholder Consent | Signed consent forms, board/gm resolutions |
| Financial Statements | Latest ITR, audited Balance Sheet & P&L |
| Creditor Consent | NOCs from secured & unsecured creditors |
| Director IDs | DIN, DSC of directors/designated partners |
| Subscription Sheet | LLP subscribers’ statement |
| LLP Agreement | Signed draft detailing roles, contributions |
4. Detailed Conversion Process
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Obtain DIN and DSC
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Ensure designated partners (DPs) have DIN (or DPIN); secure a Digital Signature Certificate, as these are mandatory
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Board & General Meetings
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Board resolution to convert, authorize LLP name application.
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General meeting resolution with 100% shareholder approval.
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File Form MGT‑14 (within 30 days of GM)
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Name Reservation
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File RUN-LLP (LLP‑1) for name approval online via MCA portal
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File Incorporation (FiLLiP & URC‑1)
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Submit Form FiLLiP (incorporation) with subscribers’ statements, office proof, DP consents.
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E-file Form URC‑1 simultaneously .
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File Conversion Application—Form 18
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Includes ITR, financials, liabilities schedule, creditor consents, shareholder declaration, asset charge status
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Receive Certificate of Incorporation (COI)
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ROC issues COI for the LLP once approved
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Submit LLP Agreement—Form 3
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Submit signed LLP Agreement (profit‑sharing, governance) within 30 days of COI
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Intimation—Form 14 to ROC
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File within 15 days of conversion with COI & FiLLiP copy
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5. Post-Conversion Compliance
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Obtain new PAN & TAN in LLP’s name; cancel old company PAN.
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Update bank accounts, GST registration, IEC code, professional tax, etc.
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Switch stationery: letterheads, invoices, contracts, website info.
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Annual filings:
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LLP Form 11 (Annual Return, by May 30)
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LLP Form 8 (Statement of Accounts, by October 30)
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File income tax returns, maintain books & audit if turnover > ₹40 L or capital > ₹25 L
6. Tax & Financial Impact
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No capital gains tax on conversion if:
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Assets/liabilities carried over; shareholders become partners in same ratio; no extra benefits; turnover < ₹60 L and assets < ₹5 Cr in past 3 years
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MAT credit loss: LLPs don’t have MAT; predecessors lose MAT credit on conversion taxguru.in.
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AMT applies if LLP qualifies, but less burdensome.
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Stamp duty on asset transfers, trademarks, property—varies state‑wise.
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No Dividend Distribution Tax, offering tax efficiency.
7. Practical Example
Example: TechStart Pvt Ltd in Bengaluru with ₹1 crore turnover and ₹3 crore assets decides to convert into TechStart LLP. Following completion of ROC filings, obtaining PAN/TAN, and complying with Form 11/8 annually, the founders enjoy:
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Simpler structure
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Lower compliance cost (₹25k vs ₹70k/year)
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Tax benefit on profit withdrawals—no DDT
A CA recommended claiming MAT credit first before conversion due to turnover size.
8. Tips for a Smoother Journey
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Complete MAT credit claims before conversion.
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Ensure NO security interest or get lender consent.
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Keep all filings and dues up to date.
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Budget ₹40k–₹60k in govt fees, stamp duty & professional fees.
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Maintain good MCA portal practices to avoid pending forms.
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File LLP Agreement on time—missing deadlines can delay compliance.
✅ Conclusion
Converting a Private Limited Company to an LLP offers greater flexibility, fewer compliance hassles, and better tax efficiency—particularly for small to mid-sized businesses. By carefully observing eligibility, assembling the right documents, and following a step-by-step process, you can successfully make the transition. Be mindful of tax considerations like MAT, asset state obligations, and filing deadlines post-conversion. Always consider consulting a chartered accountant or legal advisor to ensure full compliance.
🔍 FAQs (for SEO & Clarity)
Q1: What’s the overall timeline?
~30–60 days depending on processing and documentation readiness.
Q2: Is conversion taxable?
Not if conversion meets conditions in Section 47(xiiib) of the IT Act
Q3: Do I need fresh PAN for LLP?
Yes – LLP gets a new PAN & TAN; you must surrender the company's old PAN.
Q4: Can NRIs become partners?
Yes, through a nominee or designated partner system, complying with FDI rules
Q5: What if turnover exceeds ₹40 L?
LLP needs audited accounts and auditor appointment en.wikipedia.org.
Q6: Can I reconvert to Pvt Ltd later?
Yes—but LLP must exist for at least 2 years and undergo conversion
