There are many advantages of running a partnership business. The responsibilities are shared, the structure has clarity and decision-making can be much easier. As these businesses scale up, however, many owners prefer a safer and more adaptable setup. A limited liability partnership or LLP can be the right fit for their needs at those times. They can enjoy the limited liability of a private company as well as the flexibility of a partnership. If you are planning to move from partnership to LLP too, here is how you can ensure a smooth, risk-free switchover.
Why Move to LLP?
When you move to an LLP structure, you can stay safe for being personally held responsible for the debts of the company. Even if your business experiences legal issues or suffers losses, your savings and assets can stay safe. You can also enjoy a structured framework – that can preserve your reputation and help you to continue obtaining funding, which is impossible with a traditional partnership setup.
You can consider the transition if you want less responsibility for partners, less compliance burden as compared to a private limited company, help with finding new partners or investors and a stronger legal foundation for growth.
How to Transition from Partnership to LLP?
These are the steps that you must follow:
Talk to your partners
You need to have a clear discussion with your partners and get approval from all of them. Look at your partnership deed and check whether there are any specific clauses about business restructuring or conversion.
Get a Digital Signature Certificate (DSC)
This certificate is necessary for every designated partner. Without this, it is impossible to file with the Ministry of Corporate Affairs (MCA) online.
Submit a Director Identification Number (DIN) application
For every partner who will serve as a designated partner for your LLP, you have to submit DIN applications. You need to follow this mandatory legal step before registering your LLP.
Book a name for your LLP
You can continue to use your existing business name with “LLP” added to it or pick a new name altogether. You can make the bookings through the RUN-LLP service of the MCA portal.
File for transition
In this step, you have to submit Forms 17 and FiLLiP along with the documents required, including:
- An assets and liabilities statement
- A copy of the most recent partnership contract
- A list of all creditors who have granted their consent
You can get help from an expert who can assist you in filing all the documents properly, in a well-arranged manner.
Get Your LLP Registration Certificate
After confirming all your forms, your LLP registration certificate will be sent to you. You can proclaim your company as an LLP.
Convey the information to stakeholders
You have to inform all the stakeholders of your business – such as suppliers, vendors and customers, about the transition. Update everything and start corresponding officially, using LLP in your business name.
From Partnership to LLP: Real-World Examples
For consultancy businesses, accounting firms, law firms and other professional service firms, this type of switchover is often beneficial. Partners can get liability protection while enjoying the advantages of a partnership structure. Take a look at some of the real-world examples of partnership businesses that operate under the LLP structure.
Smith & Associates LLP
This law firm operates as an LLP.
Ernst & Young LLP
It is among the “Big Four” accounting firms and uses the LLP structure for managing its professional services. Partners can get an appropriate legal framework for big-scale operations as well as risk protection.
Infosys BPM Limited Liability Partnership
It is a subsidiary of Infosys and uses the LLP structure for managing some of its consulting services. There is more flexibility and the processes are streamlined.
Lakme Lever LLP
Lakme uses this LLP for managing its salon franchisee business. It offers a structure for partnerships with professionals across the country.
Legal Expert Insights on Transitioning from Partnership to LLP
There are quite a few advantages of transforming a partnership to a limited liability partnership, such as flexibility in management and limited liability. The process involves stakeholder engagement, regulatory approvals and legal documentation. It is important to get expert financial and legal advice for a seamless transition, which can help avoid potential pitfalls and ensure compliance at all stages.
Take a look at some of the most important legal expert insights related to such kind of transition for businesses:
Thorough Due Diligence
Legal experts focus on the need to have due diligence for properly identifying and addressing all possible financial and legal risks related to the transition of partnership to LLP.
Compliance with regulations
A seamless transition is impossible without ensuring compliance with all the relevant regulations and laws in place.
Strategic Planning
Legal professionals can offer assistance in coming up with a strategic plan for the conversion process, which can include getting approvals, submitting documents and proper management after conversion.
Tax Implications
It is very important to get expert advice on the tax implications of converting partnership to LLP, for optimizing financial benefits.
Final Words
If you are thinking about transforming your partnership business into an LLP for long-term growth and stability, you are making a sensible decision beyond a doubt. The process might appear to be slightly formal but it will not interfere with your business if you make proper plans beforehand. It can be just as safe and smooth as upgrading from a two-wheeler to a car. If you have made up your mind about making the transition, get your papers together and proceed in a well-arranged manner. With a properly completed LLP registration, you can surely ensure a better future for your company.
