Insight into conversion of a Private Company into Limited Liability Partnership (LLP)

• December 16, 2020
• CA Chandan Agarwal's Office

Introduction

Conversion of a Private Limited Company into LLP is allowed under the provision of Section 56 (Third Schedule) of the LLP Act, 2008.

Benefit

There are a large number of benefits to govern a business having LLP as legal form as compared to Private Limited Company. LLPs involve the best practices of private companies and also protect the freedom of partners, giving them the ability to decide the norms of the LLP. Some of the benefits are as follows:

• The maximum limit of shareholders is not limited in an LLP. The LLP can have any desired number of shareholders. However, the maximum number of shareholders is fixed to 200 in a private company.
• Management of funds depends entirely on the partners’ wish.
• The internal structure of a LLP is flexible as compared to that of a company.
• LLP does not have to pay the Dividend Distribution Tax which is to be paid by the companies. Also, LLPs save MAT tax and income tax due to interest and remuneration payable to partners.
• Apart from this, LLPs include lesser forms and are easier to form run and manage.
• The Finance Bill 2010 stated that the capital gain tax will not be levied on conversion to an LLP if certain conditions are adhered to.

Read more on: https://taxguru.in/corporate-law/insight-conversion-private-company-llp.html