Partnership firm to LLP
An LLP keeps the flexibility and tax treatment of a partnership but adds limited liability and a separate legal identity. Conversion is governed by Section 55 and the Second Schedule of the LLP Act, 2008.
| Basis | Partnership firm | LLP |
|---|---|---|
| Separate legal entity | No | Yes |
| Partners' liability | Unlimited — personal assets at risk | Limited to agreed contribution |
| Maximum partners | 50 | No limit |
| Books of account | As per tax laws | Mandatory under the LLP Act |
| Digital signature | Not needed | Required for designated partners |
Conditions
- All partners of the firm must become partners of the LLP — no one joins or leaves during conversion
- Consent of all partners, and of secured creditors where applicable
- Designated partners must have DSCs; DPINs are allotted through the form
- Income tax returns and statutory dues of the firm should be up to date
Process
- DSC for designated partnersObtained online.
- Name reservationRUN-LLP, or within the incorporation form.
- File FiLLiP with Form 17Application and statement for conversion, with the firm's assets and liabilities statement certified by a CA, partners' consent and creditor details.
- Certificate of registrationThe ROC registers the LLP; the firm's assets, liabilities, contracts and proceedings transfer to the LLP automatically.
- LLP agreement and Form 14File the LLP agreement (Form 3) within 30 days and inform the Registrar of Firms of the conversion (Form 14).
For 12 months after conversion, the LLP must mention on its official correspondence that it was converted from the named partnership firm.
Proprietorship to private limited company
As a proprietorship grows, its owner carries more personal risk. Moving the business into a private limited company limits liability, makes it easier to raise funds and adds credibility. Technically a new company is incorporated and the proprietorship's business is taken over by it, usually through a business transfer (slump sale) agreement.
| Basis | Proprietorship | Private limited company |
|---|---|---|
| Owners | One | 2 to 200 shareholders |
| Liability | Unlimited | Limited to share capital |
| Legal entity | No | Yes |
| Raising capital | Difficult | Easier — equity possible |
| Taxation | Owner's slab rates | Corporate tax rates |
| Compliance | Low | Higher |
Process
- DSC and DINFor all proposed directors (minimum two).
- Name approval and incorporationSPICe+ filing, with the MoA objects stating that the company will take over the proprietorship.
- Business transfer agreementTransfer of assets, liabilities, contracts and employees from the proprietor to the company.
- PAN, TAN, bank and registrationsNew PAN and TAN, current account, and fresh GST registration in the company's name.
To keep the transfer tax-neutral under Section 47(xiv) of the Income Tax Act, the proprietor must generally receive at least 50% of the voting power and hold it for five years, with all assets and liabilities transferred and no other consideration paid. We will review whether this route suits you.
Private limited company to OPC
A private company with only one shareholder (or one that wants to consolidate under a single owner) can convert into a One Person Company under Section 18 of the Companies Act. Since 2021 there are no turnover or capital caps.
- Board meetingApprove the conversion and call an EGM.
- Obtain NOCsNo-objection from all members and creditors.
- EGM and special resolutionApprove conversion and altered MoA and AoA.
- File MGT-14 and INC-6With directors' affidavit, list of members and creditors, latest audited balance sheet and NOCs.
- Certificate of conversionIssued by the ROC.
Private limited to public limited company
Converting to a public company allows you to raise money from the public and, eventually, list on a stock exchange. It brings greater disclosure and compliance.
- Increase directors to at least 3 and members to at least 7
- Board meeting to approve and call an EGM
- Special resolution altering the AoA (removing private company restrictions) and the name
- File MGT-14 and INC-27 with the ROC
- Fresh Certificate of Incorporation issued; update PAN, bank, GST and stationery
Frequently asked questions
Can an unregistered partnership firm be converted into an LLP?
The firm should generally be registered with the Registrar of Firms before applying. If yours is unregistered, we can register it first.
What is the main benefit of converting a firm to an LLP?
Partners' liability becomes limited to their contribution, and the business gains perpetual succession.
Who cannot be a partner in an LLP?
A minor, a person of unsound mind, an undischarged insolvent, or a person convicted of certain offences or disqualified as a director.
Can an LLP be converted into a private limited company?
There is no direct conversion route under the Companies Act for an LLP. Instead, the business is usually moved into a newly incorporated company.
Pvt Ltd or OPC — which is better?
A private limited company suits businesses with several owners or plans to raise investment. An OPC suits a single owner who wants limited liability with simpler management.