1. PROS & CONS
OF
CONVERSION OF FIRM
From Partnership
To
Limited Liability Partnership
By:
Asija & AssociatesLLP 1

2. CONTENTSOFPRESENTATION
 What is a LLP ?
 Why LLP?
 Impact of Conversion from Partnership to LLP
 Vis-à-Vis Partnership Act & LLP Act
 Vis-à-Vis Income Tax
 Vis-à-Vis Service Tax
 Vis- à-Vis Value Added Tax
 Process for Conversion of Firm to LLP
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Asija & Associates LLP, Chartered Accountants

3. WHAT IS A LLP ????
 LLP means a partnership formed & registered under the
Limited Liability Partnership Act, 2008.
 LLP is an alternative corporate business form, that offers
benefits of limited liability of a company and the flexibility of
a partnership.
 Thus LLP is a hybrid containing elements of both ‘a
corporate structure’ as well as ‘a partnership firm structure’,
hence resulting into a very convenient business structure.
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Asija & Associates LLP, Chartered Accountants

4. WHY LLP
4
S
1. Stability
2. Security
3. Strength
4. Specialized Service
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Asija & Associates LLP, Chartered Accountants

5. 5
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisPartnershipAct&LLPAct
Pros on Conversion:-
Registration of Firm :-
 It is not Mandatory for a Partnership Firm to get
registered.
 It is Mandatory to get the LLP Registered with the
Registrar of LLP. (Stability)
 Restriction on dissolution at will
 Partnership Firms are as per will or for particular
adventures.
 LLP - Can have voluntary winding up or Can be wound
up through Court. (Stability)
 Ownership of Property
 The property of the partnership firm is the property of
individuals comprising it.
 In LLP, property belongs to LLP. (Stability & Security)
Asija & Associates LLP, Chartered Accountants

6. 6
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisPartnershipAct&LLPAct
Pros on Conversion:-
 Transfer of Ownership
 It is only possible on consent of all the partners of
partnership firm.
 In LLP, ownership is transferred as per the LLP Act.
(Stability)
 Perpetual Succession
 Retirement or death or insolvency of a partner
dissolves the partnership firm.
 In LLP, retirement or death or insolvency of a partner
has no affect on entity’s life.(Stability)
 Limited Liability
 In firm, partner’s liability is unlimited.
 In LLP, partner’s liability is limited. (Security)
Asija & Associates LLP, Chartered Accountants

7. 7
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisPartnershipAct&LLPAct
Pros on Conversion:-
 Separate Legal Entity
 Existence of partnership firm is not distinct from its
members.
 Existence of LLP is distinct from its members. Hence,
can be sued or it can sue others without involving its
partner.(Security)
 ‘N’ number of partners
 Maximum number of partners in a partnership firm is
50.
 LLP can have any number of partners as no upper limit
has been set by the Act.(Strength & Specialized Services)
 Business transaction with the partner
 In partnership firm, partner can not transact with the
entity.
 Its allowed in LLP form of business.(Strength)
Asija & Associates LLP, Chartered Accountants

8. 8
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisPartnershipAct&LLPAct
Pros on Conversion:-
 Creditworthiness
 Partnership firms depends upon the goodwill and
creditworthiness of its partners
 LLP- Due to compliances & disclosures under LLP Act
enjoys high degree of creditworthiness. (Strength)
 Transfer of assets, liabilities, etc.,
 All the assets, liabilities, interests, rights, privileges,
obligations relating to firm & the whole of the
undertaking of the firm shall be transferred to and
shall vest in the LLP on conversion, without further
assurance, act or deed.
Asija & Associates LLP, Chartered Accountants

9. 9
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisPartnershipAct&LLPAct
Cons on Conversion:-
 Audit
 In LLP, audit is mandatory if turnover exceed Rs. 40
Lakhs or capital contribution exceeds Rs. 25 Lakhs.
 Audit is not prescribed for partnership firm.
 Inspection of Document
 Documents of partnership firm is not available for
public inspection.
 In LLP, the same is available on payment of prescribed
fees.
 Compulsory Filing
 No compulsory Filing prescribed under the law.
 Following 2 Returns need to be filled as per LLP Act
 Filing of Annual Return.
 Filing of Statement of Account & Solvency.
Asija & Associates LLP, Chartered Accountants

10.  Taxation of Limited Liability Partnership (LLP) as per Finance Bill,
2009
 As an LLP and a general partnership is being treated as
equivalent (except for recovery purposes) in the Act,
 the conversion from a general partnership firm to an LLP
will have no tax implications if :-
 the rights and obligations of the partners remain the same
after conversion and
 if there is no transfer of any asset or liability after
conversion.
 If there is a violation of these conditions, the provisions of
section 45(3 &4) shall apply (Sec 47)
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisIncomeTax
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Asija & Associates LLP, Chartered Accountants

11.  Impact on PAN & TAN due to Conversion:-
 Will have to get a fresh PAN.
 Following will be the changes in new PAN:-
 4th Alphabet in PAN of the entity will change from “F” to
“L”.
 Name will be updated.
 But there will be no Change in Date of Birth / Incorporation.
 No Change in Tax Deduction Account No. (TAN) only Correction
Needs to be filed for Updating the Name
 Signing of Income tax Return (Sec 140):-
 For partnership Firm - By Managing Partner, and in case there is
No Managing Partner then by any Partner.
 For LLP Firm - By Designated Partner, and in case Designated
Partner is not Available then by any Partner.
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisIncomeTax
11
Asija & Associates LLP, Chartered Accountants

12.  Recovery of Tax of LLP in Liquidation (Sec 167C & 36):-
 In LLP, the liability of partner is limited, hence he will not be
liable for recovery of tax unless the reason for non recovery is
negligence, etc.
 In partnership, partners will be jointly & severally liable for non
recovery of tax as their liability is unlimited.
 Presumptive Taxation Scheme (Sec 44 AD):-
 Partnership – It can avail the advantage of Presumptive Taxation
Scheme, where in its get a relief from maintaining books of
account & is also exempt from getting the books of account
audited and the rate of computation of income on an estimated
basis is 8% of turnover.
 LLP- It does not enjoy such scheme.
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisIncomeTax
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Asija & Associates LLP, Chartered Accountants

13.  Will there be any Change of Service Tax Registration Number:-
 In the event of any change in the constitution of the firm leading to
change in PAN, the entity shall get himself registered afresh and
 In cases of change in constitution of business, where there is no
change in PAN, the same shall be intimated to the jurisdictional
Central.
 Intimation to the Jurisdictional Central Excise Officer within 30
days of change by way of amendment to the registration online at
www.aces.gov.in.
ImpactofConversion ofCAFirms-FromPartnershiptoLLP
Vis-à-VisServiceTax
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Asija & Associates LLP, Chartered Accountants

14.  Technical Error in filing revised ST-1 application. In Form ST-1 the
drop down menu of the Constitution Column, does not contain the
option of LLP.
 As per section 65B(37) of the Service Tax - Finance Act 1994 the
definition of Person include LLP, thus option of changing the
constitution from Partnership to LLP should be made available.
 What Option will You Choose:-
Others
or
Partnership
You may leave the Constitution as partnership Too, as w.e.f.
01/04/2012 definition of Partnership Firm as per Rule 2(1) (cd) of
the in Service tax Rules 1994 has been amended to include LLP too.
ImpactofConversionoffromPartnershiptoLLP
Vis-à-VisServiceTax
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Asija & Associates LLP, Chartered Accountants

15. 15
ProcessofConversion
FromPartnershipFirm-to- LLP
 Eligibility for Conversion of Firm into LLP
 It should be a firm as per section 4 of Indian Partnership
Act, 1932.
 All partners of partnership firm shall become partners of
LLP.
 Process:-
1. Obtain DSC & DIN (DPIN).
2. Apply for Reservation of Name of LLP.
Asija & Associates LLP, Chartered Accountants

16. 16
ProcessofConversion
FromPartnershipFirm-to- LLP
3. a) Apply for Conversion.
&
b) File Incorporation Documents and Subscriber’s Sheet.
4. File Information on LLP Agreement.
5. Certificate of registration of Conversion shall be issued by
Registrar of LLP.
6. Inform concerned Registrar of firms about conversion of firm
into LLP.
Asija & Associates LLP, Chartered Accountants

17. 17
ProcessofConversion
FromPartnershipFirm-to- LLP
 Notice of Conversion in Correspondence.
The LLP shall ensure (for a period of 12 months) that every
official correspondence of the LLP disclose the fact that:
 It was a partnership Firm which is converted into a LLP.
 The name and registration number, if applicable, of the firm
from which it was converted
Thus, the benefit of brand name and goodwill is not lost.
Asija & Associates LLP, Chartered Accountants

18. 18
ForAny Further Queries Clarification Contact
CS Manish Mishra
Asso. Director
Corporate Law Vertical
corporatelaws@asija.in
Partner In Charge- CAAshish Kapoor
(ashish.kapoor@asija.in)
Asija & Associates
Chartered Accountants
Ph. no. : 0522- 4004652, 2205072
Thank You….