A Limited Liability Partnership combines the advantages of a company with the flexibility of a partnership. In an LLP, partners have separate legal entities and are liable for debts only to the capital shared by them in the company. Two or more people can be part of the company as active or sleeping partners.
LLP offers advantages of both Partnership and Private Limited Company (PLC), making it an ideal choice for small businesses that don’t foresee any need to raise equity funds. However, some of these small firms may want to convert LLP into PLC at some point for more growth and expansion as an LLP can’t raise funds through equity shares like a PLC.
Let us help you understand the complete process of converting your LLP into a PLC. Keep on reading!
As per section 366 of the Companies Act 2013 and Company (Authorized to Register) Rules 2014, an LLP can be converted into PLC. First of all, it should be advertised in a local and national newspaper. No Objection Certificate (NOC) is also required from the Registrar of Companies (ROC) where the LLP registration was done earlier. After that, the private limited company registration process can be undertaken.
Name Approval for PLC
Form Reserve Unique Name (RUN) needs to be submitted in the prescribed e-format for name approval. Once the name is accepted by ROC, it is valid for 60 days.
Obtain DSC and DIN for PLC
The directors of the company need Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the private limited company registration. An application form must be filed on the MCA portal to obtain the DSC and DIN. The directors need to provide a self-attested copy of identity proof and address proof along with passport size colour photographs. Further, with the help of a practising professional, you can complete the conversion process smoothly.
Filing of URC-1 for Private Limited Company Registration
After the name approval, the URC-1 form needs to be filed with the following documents:
- Details of the shareholders including names, addresses and shares held by them should be provided.
- Details of the company Directors including name, address, DIN and passport number with an expiry date.
- According to section 164 of the Companies Act, 2013, an affidavit from all the proposed first directors declaring they are not disqualified or banned from being a director of a company. All information must be filled in a complete, correct and accurate manner to their best knowledge in the application form.
- Names and addresses of the designated partners and a copy of an LLP agreement and certificate of registration that is duly signed by designated partners must be provided.
- A statement with the details of the nominal share capital of the firm, separated number of shares, the number of shares taken and amount paid for every share. And the word private limited is used as a suffix after the company name.
- Written consent or no objection certificate from creditors should be given.
- A copy of the newspaper advertisement, duly certified statement of accounts of the company which must not be 6 days preceding the date of the application by the auditor.
Drafting of MOA and AOA
Memorandum of Association (MOA) and Article of Association (AOA) need to be formulated and filed with ROC. The conversion from LLP to PLC grants several tax benefits. Moreover, you need to make sure that designated partners of LLP share the same shareholding in PLC.
Over to You
We hope this blog helps you understand the complete conversion process. If you want to raise funds through equity shares through venture capital, angel fund or seed funding, then Private Limited Company registration is definitely better for you.
If you are looking for expert assistance, professionals at LegalWiz.in are always ready to guide you and help you out throughout the whole process. And if you are not sure whether you should go for the conversion or not, you will get expert guidance to help you make the best possible decision for your business.