Why LLP Registration is Necessary?

• Assisting small businesses in understanding the concept of LLP, which is a simple and convenient way to start, operate, and manage their company.
• LLP offers the advantages of limited liability while also providing internal business organization benefits.
• If the annual turnover does not exceed Rs 40 lakhs and the capital contribution is within Rs 25 lakhs, there is no requirement for an audit. The payment of Dividend Distribution Tax (DDT) is not mandatory.
• Board or annual business meetings are not needed as well. LLP registration is comparatively straightforward and effortless, unlike for a Private Limited Company.

  What are the main advantages behind registering a Private Limited Company?

  ·         An LLP is a type of business structure that has no shareholders. Instead, all individuals who own the LLP are known as partners. This makes it an unattractive option for certain investors, such as private equity investors and venture capitalists. These investors prefer to invest in businesses that they can actively manage, which is not possible with an LLP. As a result, they consider investing in a private limited company as a better option.

  ·         If the LLP experiences growth, it would be more advantageous to transform the enterprise into a private limited company.

  Steps involved in converting LLP into a private limited company

  • Step1: To commence the Conversion process, the initial stage involves acquiring name approval from the ROC (Registrar of Companies) through online application.
  • Step 2: Furthermore, DSC and DIN have to be obtained for all seven of the company's directors. DIN can be obtained via the MCA portal.
  • Step 3: Once the name approval is secured, the following step is to compile and submit form No URC-1.
  • Step 4: After which, the formal Memorandum of Association (MOA) and Articles of Association (AOA) for the company have to be meticulously crafted and submitted to the Registrar of Companies.

  Converting an LLP into a Private Limited Company is a natural progression for business growth. An LLP framework is not suitable for private equity or venture capitalists, and private limited companies are generally preferred by investors for investment purposes. When it comes to FDI, private limited companies are considered to be the more favourable choice compared to LLPs.

  Conforming to all prescribed regulations, it would be a wise course of action to convert an LLP to a private limited company.

  Points to be consider for converting an LLP into a private company

  ·         In order to convert an LLP into a Private Limited Company, certain criteria must be met prior to initiation. One such requirement is the need for the LLP to consist of a minimum of seven members or partners, and obtain approval from all involved parties.

  ·         Prior to the initiation of the incorporation procedure, certain tasks must be executed. Specifically, the conversion must be advertised in local and national newspapers, and an NOC from the relevant ROC in which the LLP is registered is required. Once these steps have been fulfilled, the incorporation process may commence.

  What are the benefits of transforming LLP to Private Limited Company?

  ·         When LLP becomes a Private Company, depreciation and losses won't affect the books since they will be carried over from the LLP.

  ·         Additionally, the company can maintain its brand value without making any changes or increasing marketing efforts by converting to a Private Limited Company.

  ·         The Liability Conversion process ensures that partners are only liable for the capital they have signed up for and not anything else.

  ·         Meanwhile, if a Limited Liability Partnership is transformed into a Private Company, it becomes possible for the business to offer Employee Stock Ownership Plans. ESOPs can be an attractive incentive plan for prospective employees, making it easier to recruit skilled workers for the company.

  ·         If a company's registration process is stringent and effective, its structure will earn greater credibility compared to other entities. This elevated status enables the company to effortlessly acquire funding from external sources.

  ·         When an LLP becomes a Private Company, it creates a unique legal standing that separates ownership and management, allowing each to focus on their respective responsibilities. In addition, shareholders are granted the authority to oversee and direct operations while maintaining their voting power.