Conversion of Private Limited Company into LLP

Taxation on the Conversion of Company into LLP

The conversion of a private limited company into an LLP will not attract any capital gain tax as this conversion is not defined as a transfer under section 47 (xiiib) of the Income Tax Act, 1961 (Section 70 (ze) of Income Tax Act, 2025), subject to satisfying the following conditions.

• The assets of the company should generally not be subject to subsisting security interests or encumbrances that restrict transfer upon conversion.
• Companies having Foreign Direct Investment (FDI) may not qualify for smooth conversion into LLP unless sectoral conditions and FEMA regulations are specifically satisfied.

Restriction on Conversion Where FDI Exists:

• A company having foreign investment cannot freely convert into an LLP unless the conversion falls within sectors where:
  1. 100% FDI is permitted under the automatic route; and
  2. There are no FDI-linked performance conditions attached to the sector.
• Prior approval from the Government or RBI may be required in certain cases. Non-compliance with FEMA regulations may result in penalties and regulatory complications.

Any violation of prescribed conversion conditions may result in withdrawal of tax exemption and trigger capital gains taxation.

To ensure your conversion is structured correctly and all tax exemption conditions are met, consult PKC’s Tax Advisory Services for expert guidance tailored to your business.”

1. All assets and liabilities of the Company enhance the assets and liabilities of the LLP.
2. All the shareholders of the Company fit the partners of the LLP
3. The capital proportion and the ratio of profit-sharing of partners are in a similar proportion as that of the shareholding in the Company.
4. The shareholders do not get any benefit, directly or indirectly in the LLP, except by way of capital addition and profit-sharing ratio.
5. The total sales, gross, and turnover in any of the 3 preceding years from the conversion date of the do not exceed Rs. 60 Lakhs.
6. The total value of assets as resembling in the books of account of the Company in any of the past 3 years does not exceed Rs. 5 crores.

Documents required for conversion of company into LLP.

• Certificate of Incorporation of Company.
• Memorandum of association and article if association.
• Pending litigations against the company. if any,
• Form 3- Form of application and declaration of incorporation of an LLP.
• List of all creditors and their client
• Statements of all asset and liabilities of the company.
• No objection certificate from Tax Authorities.
• Consent of each shareholder has been received to convert the company into an LLP.
• Latest copy of income tax return is to be filed with ROC.
• Pan and address of all directors.
• Any other documents as may be specified. 

Effects of Converting company into LLP

• The conversion of Company into LLP has no bearing on existing liabilities, agreements, obligations.
• The Name of Private Company is removed from the register of Registrar of companies.
• All assets, liabilities, rights, interest and privilege of Private Limited Company is transferred to LLP 
• Any license given under the law governing the Private Limited Company will not be used for LLP, it will be cancelled upon conversion.

Procedure for conversion of Private Limited Company into LLP. 

Step.1 Board meeting

The board resolution should be passed, approving the conversion of firm into LLP and special Resolution in General Meeting approving the same by the shareholders.

Step.2 Filing of MGT-14 with ROC

The company shall file a copy of Board Resolution and special Resolution passed in its Board meeting and General meeting in form MGT-14 within 30 days of passing such Resolution along with required fees and documents with the Registrar of Companies (ROC).

Step.3 Application for Name of LLP

• The Company should apply for name of LLP in form RUN-LLP with the ROC along with stipulated fees.
• The name should be unique and acceptable as defined by Companies Act2013 or LLP Act2008. The name cannot be same or similar to an existing Company or LLP in same Industry or Field.

Step.4: Filing of Application for conversion into LLP

The Ministry of Corporate Affairs (MCA) has notified that Form 18 for the purpose of conversion of Private/Public company into LLP, a web form filed along with Form FiLLiP (Incorporation form).

Other points

• Individuals who do not have DPIN, can make an application for allotment of DPIN in form FiLLiP upto five individuals.
• Form FiLLiP has an option to file Form 9 and also an application for name Reservation for LLP.
• Details of partners and designated Partners can be filed through an option available in Form FiLLiP.

Step.5 Certification of Registration

After the completion of verification of documents by ROC and approved by Ministry, ROC issues Certificate of Incorporation (CIN) as company converted into LLP.

Step.6 Intimation to ROC upon conversion into LLP

The Limited Liability Partnership shall an application about its conversion with ROC in form-14 within 15days from the date of its Registration along with.

• Copy of Certificate of incorporation
• Any other documents as mention

Step.7 Filing of LLP Agreement

LLP agreements governs the rights, duties and share among the partners and between the LLP and its Partners 

• LLP agreement must be filed in Form 3 online in MCA portal.
• Form 3 is to be filed within 30days from the date of Incorporation.
• the LLP agreement is to be written or printed in Stamp paper.

Stamp Duty on LLP Agreement and Conversion Documents

Stamp duty becomes applicable at the time of execution of the LLP Agreement after incorporation of the LLP and before filing Form 3 with MCA. The duty payable varies from state to state depending on the capital contribution and applicable State Stamp Act provisions. In most cases, the stamp duty payable on conversion into LLP is comparatively lower than restructuring through separate transfer mechanisms.

Step.8 Post Compliance for LLP

• The Limited Liability Partnership should have its own Bank Account in its name for business transactions.
• The Limited Liability Partnership should obtain its own GST number registered as LLP, as the company’s GST registration is cancelled upon conversion. Navigating these post-conversion compliances can be complex — Book a FREE 30-minute consultation with PKC’s experts to ensure every step is completed accurately and on time
• After conversion into LLP, the entity is required to comply with ongoing LLP compliances under the LLP Act, 2008. Important annual compliances include:
• 1.     Form 11 – Annual Return
     To be filed with ROC every year containing details of partners and LLP structure.
  2.     Form 8 – Statement of Account & Solvency
     To be filed annually disclosing financial position and solvency status of the LLP.
  3.     Income Tax Return Filing
     The LLP must file annual income tax returns within prescribed due dates under the Income Tax Act.

  Failure to comply with annual filing requirements may attract additional fees and penalties.

Forms for Conversion of Private Company into LLP

Estimated Cost of Conversion of Private Limited Company into LLP

Note: The actual conversion cost may vary depending on the size of the company, state of registration, contribution amount, number of partners, and complexity of compliance requirements.