What is Conversion of Partnership Into LLP?

The concept of LLP is introduced under the Limited Liability Partnership Act, 2008. It has become the premier choice of small and medium-sized enterprises.

It is governed by the LLP Act, 2008 and the process for conversion of partnership firm into LLP is covered under Second Schedule of the LLP Act.

The major requirement for the conversion of Partnership into LLP is that the LLP formed from the conversion of the partnership have the same partners as the original partnership firm. Furthermore, there are tax benefits, no audit requirements below a certain capital, no cap with regard to a number of partners or capital contribution requirements.

Limited Liability Partnership (LLP) can prove to be a much better business vehicle in comparison to a regular partnership. Partnership firms are at a disadvantage in comparison to Limited Liability Partnership (LLP) as partnership firms do not provide limited liability protection to partners. LLP is considered a separate legal entity. LLP has the ability to appoint an unlimited number of partners and there is ease of ownership transfer.

The LLP formed cannot have new or fewer Partners than the Partnership firm. Therefore, if it is required to add partners then the partnership should be first converted into an LLP and then partners must be added to the newly formed LLP.

In case it is required to remove partners then it is best to remove them prior to starting the process of conversion.