In India, various business models exist like proprietorship, company, limited liability partnership (LLP), HUF etc. among these Partnership Firm is one of the popular and widely accepted form of business where two or more person are intending to carry on any business activities. As when more than one or two person are willing to start business, sole proprietorship may not be appropriate form whereas formation of Company requires sufficient amount of fund and calls for various compliances, thus in such scenario forming a Partnership Firm turns out to best alternative.   Since partnership as a form of business has its own limitation like no separate legal entity, no limited liability, capital funding crunches etc., partners are now inclining towards conversion of their partnership firm into a Limited Liability Partnership having features similar to a corporate.

1. Partnership Firm into LLP
Expanding the Business Horizon

2. Forms of Business
In India, various business models exist like proprietorship, company, limited liability partnership (LLP), HUF
etc. among these Partnership Firm is one of the popular and widely accepted form of business where two or
more person are intending to carry on any business activities. As when more than one or two person are
willing to start business, sole proprietorship may not be appropriate form whereas formation of Company
requires sufficient amount of fund and calls for various compliances, thus in such scenario forming a
Partnership Firm turns out to best alternative.
Since partnership as a form of business has its own limitation like no separate legal entity, no limited liability,
capital funding crunches etc., partners are now inclining towards conversion of their partnership firm into a
Limited Liability Partnership having features similar to a corporate.
2

3. Reason for convertion of Firm into LLP?
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1. The major reason behind converting a Firm to Limited Liability Partnership is to get high credibility and to
move a ladder up in the corporate sector.
2. LLP is a form of body corporate and gives more brand recognition and increases value in the market when
compared to the image of a partnership firm in the business field.
3. It is certain that any investor or banks gives more preference to a LLP in comparison to an unregistered or
registered firm. Further conversion into LLP gives the firm status of a separate legal entity and it gets
registered in the database of Ministry of Corporate Affairs.

4. LLP at a Glance
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A partnership which got itself registered under The Limited Liability Partnership Act, 2008 whereby partners
intends to carry an objective clearly mentioned through an agreement is known as an arrangement of
Limited Liability Partnership. Below given are some features of LLP as provided under LLP Act, 2008:
1. Status of body corporate: LLP is a body corporate which enjoys status of separate legal entity and perpetual
succession meaning thereby partners of LLP are considered separate from LLP and partners may come and go
but LLP will remains in existence.
2. Designated Partners and Partners: LLP shall have at least two designated partners who are individuals and at
least one should be resident in India, Body corporates can also be members of LLP where nominee of such body
corporates will be considered as designated partner.
3. LLP Agreement: All the mutual rights and liabilities of partners will be governed by LLP agreement including its
objectives, duties, manner of induction and cessation, termination and other important clause.
4. Partner Status: Every Partner of LLP is agent of LLP for the purpose of carrying business of LLP
5. Liability: Partners are not held personally liable directly or indirectly solely for the reason of being partners,
unless they have acted without authority and breached clauses of partnership by wrongful act.

5. Difference in Firm and LLP
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Particular Limited Liability Partnership Partnership Firm
Registration LLP comes into existence only after
registration.
It is not necessary to register a partnership
firm.
Partners may or may not register their Firm.
Act LLP is governed by LLP Act, 2008. Partnership Firm is governed by Partnership
Act, 1932.
Perpetual
Succession
It enjoys perpetual succession. Does not have perpetual succession.
Status Separate Legal Entity. No Separate Legal Entity.
Designated
Partner
Minimum two designated partners
required.
No concept of Designated Partner.

6. Difference in Firm and LLP
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Particular Limited Liability Partnership Partnership Firm
Residency One partner must be resident in India. No such requirement.
Public
interface
Documents can be available after
payment of certain fees to the Ministry
of corporate affairs.
No such facility for partnership firm.
Compliance Various compliances are required
including annual return, filing statement
of asset and liability etc.
Comparatively less compliance.

7. Process
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Section 55 of Chapter X and second schedule of LLP Act, 2008 mentions the provisions for conversion of firm
into LLP. A partnership firm may apply to convert itself into LLP in accordance with second schedule after
following below given procedure:
1. Partners to have valid class two digital signature and DIN/DPIN.
2. Partners to prepare a LLP agreement to chalk out the management and working of LLP and to decide
particulars to be included in agreement and file details for incorporation like registered office, profit
sharing ratio etc.
3. Partnership Firm to apply for name in form RUN_LLP with Central Registration Centre, governed and
controlled by MCA.
4. After approval of name apply for incorporation or DIN (if do not have DIN) of LLP in Form FiLLiP.
5. Alternatively, Firm can directly file form FiLLiP as it also gives option of name reservation in the form along
with incorporation and DIN approval.
6. File E Form 17 for application for conversion and filing statement for conversion of a Firm into LLP
7. File E Form 3 for providing information of LLP agreement with the Central Registration Centre.
8. After approval of incorporation and Form 17 is required to be filed for intimating the Registrar of Firms
about conversion of firm into LLP.

8. Pre requisites for Conversion
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o All partners of the Firm to become partners of LLP and no else cannot be partner at the time of application.
o Consent of all secured creditor is to be obtained prior to making application for conversion.
o All applicable clearances, approvals and permissions for conversion of the firm into LLP For example if any
firm is registered with any institutional body like Institute of Company Secretaries of India (ICSI) then it
should seek approval from ICSI for such conversion.

9. Points to Remember
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• All property, asset, liability, interest, rights , privileges, obligations of the Firm will be transferred to the
LLP.
• All proceeding pending against the firm will continue against the LLP.
• Any conviction, order, judgment, ruling of any court, tribunal or any other authority in favour or against the
Firm may be enforced by or against LLP.
• LLP will be deemed to be a party of any agreement which was entered into by Firm initially.
• Every contract of employment shall continue to remain in force after conversion into LLP.
• If firm is appointed anywhere for some role or capacity it will continue to remain with LLP as if LLP was
appointed for such role.
• Every partner of the Firm will remain personally liable for the acts conducted prior to the conversion of Firm
into LLP.
• Any approval or licence issued in the name of the firm will remain effective and valid for the LLP post
conversion subject to the any other provision prescribed by authority permitting such approval or licence.

10. Clarification by Ministry on some Issue
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Ministry of Corporate Affairs vide its circular dated 09/2013 clarified regarding below given points for
conversion of Firm to LLP:
1. Provisions for LLP Act,2008 specifies for conversion of Firm into LLP, it is not allowed to convert to or
more firms into one LLP
2. If an Auditor Firm, being auditor of some Company, gets converted into LLP then such LLP would be
deemed to be the Auditor of the Company and appointee Company shall note of the same through Board
Resolution.

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