Running and operating a business currently is not just confined to a particular region or a country but is being presented in the global market across the world. Trade barriers have been removed, and the companies and businesses are becoming unified, expanding worldwide while growing.
LLP (limited liability partnership).
The LLP (limited liability partnership) was brought into place under the LLP act, 2008. The online LLP registration started in the year 2010 in India. As per the stats, the registration for the LLP (limited liability partnership) soared by almost 55% in the financial year (FY) 2014-15, while registration decreased for the private limited companies (PLC).
Many companies and businesses registered under the LLP are currently eager to convert into a private limited company (PLC) due to their business growth and the benefits that private limited company offers to them.
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The LLP can be converted into the private limited company (PLC) under provisions prescribed in section 366 of the companies act, 2013 and also companies’ rules, 2014.
Conversion of LLP (limited liability partnership) into the private limited company.
Some various requirements and conditions require to be met to convert the LLP (limited liability partnership) into the private limited company as given below;
– The LLP (limited liability partnership) should have a minimum of seven partners.
– All the partners should give consent to convert the company or firm.
– The advertisement requires to be published in the local and national newspapers.
– The RoC where the LLP (limited liability partnership) is registered should offer a no-objection certificate (NOC).
Once all the requirements mentioned earlier are met, the incorporation process can be initiated. The incorporation process is as given below;
– Name approval must be acquired from the RoC (registrar of the company) by filing an online application. To apply for the name, one requires to select from the items stated in the INC form– Once accepted, the name will have the validity of 2 months.
– The DSC (digital signature certificate) and the DIN (digital identification number) should be acquired for all seven company members.
– To acquire the DIN, the application should be submitted on the portal of the ministry of corporate affairs (MCA).
– The application is processed and further sanctioned by the ministry of corporate affairs (MCA).
– All the documents should be filed as per the requirements.
Submitting form no. URC-1.
Once the name gets sanctioned from the RoC (Registrar of companies), one requires to submit in form-1 along with the following documents;
– All the members’ details, name, address, DIN, Passport number and so forth.
– The first directors of the company’s list along with their details.
– An affidavit from the first directors mentioning that they are not banned from being the director under section-164. All the documents submitted have to be complete, correct and the information given has to be true.
– A list that consists of names and addresses of all the partners under the LLP (limited liability partnership) along with an LLP’s copy.
– A statement that shows the following details;
– The company’s number of shares and ratio into which they have been divided.
– Number of shares that are considered into account with the amount each share.
– The firm’s name has to be given along with the word of private limited or limited.
– An NOC from all the creditors.
– The company’s statement of accounts and copy of the newspaper advertisement.
MoA and AoA.
Once the name is sanctioned, and the form-1 is approved from the RoC, AoA and MoA are to be formed.
Once all the steps mentioned above are taken, the LLP can convert into a private limited company.
Among the LLP or private limited companies, which one is better?
LLP is the dominant option in the case of small companies and businesses whose turnover is not more than Rs. Forty lacs yearly and capital contribution less than Rs. 25 lacs. Such LLPs do not require any annual audits. In private limited companies, the audit of financial statements will have to be filed regardless of the company’s turnover.
In small companies and businesses, LLP has an upper edge over private limited companies. But whose turnover is more than Rs. 40 lacs then the private limited company is suitable as;
– The LLP has the concept of partners and not of shareholders; all the proprietors are the partners. Nonetheless, this concept does not catch the eyes of VCs and investors, making LLP not a suitable option for significant companies.
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In conclusion.
It is partners’ and individuals’ choice in the business and turnover or growth of the business by which one can determine whether it is suitable for a private limited company or LLP.