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Conversion of a Company into LLP–Commercial Motivations
Conversion of a company into an LLP is not common in India. However, conversion from a company to an LLP may be very useful in the following circumstances:
1. You don't have any financial investors(such as venture capital or private equity investment), you do not plan to take investors, and you want to save on taxes. Note that this may not be easy in a real-life scenario - as lenders, investors and promoters often tend to prefer a business to be organized as a company, as they trust the governance mechanisms that companies are required to observe.

Note:  You should understand that it is possible to introduce corporate governance processes in an LLP which are very similar to that of a company, by modeling your LLP Agreement on similar lines as the constitutional documents of a company (Memorandum of Association and Articles of Association) or a Shareholders Agreement (SHA), but this can be a cumbersome process. The promoters can borrow ideas from SHAs and introduce tight governance frameworks in LLPs if they desire for their own benefit.

2. You want to scale down operations – If for some reason you have to scale down operations for a particular line of your business, you can convert your company into an LLP. It will reduce your compliance costs and give you comparatively more flexibility than a company. It is assumed that you will not require financial support from investors in such a scenario.

3. You want to reduce compliance costs, governance hassles and increase flexibility in operation – Note that these may only be possible to a limited extent if you have investors who insist that you model you model your LLP Agreement as close as possible to the articles of association or an SHA.
Steps for conversion of a company into LLP
For the conversion, you would be required to follow the following steps (for details, see the section on procedure for incorporating an LLP):
  • If the LLP will have any new partner (who wasn’t a director in the company), obtain Director Identification Number (DIN) and Digital Signature Certificate (DSC) for the proposed partners of the LLP, Reserve name of the LLP with the Registrar of Companies (ROC),
  • File online application in Form 17 with the Registrar with certain attachments, such as:
    •  the LLP Agreement,
    • a declaration (from a CA/CS/advocate) under Section 11(1) of the LLP Act,
    • statement of assets and liabilities,
    • consents from creditors
    • no-objection certificate from income tax authorities.
    • approval by the governing body of professionals, in case of conversion by a firm of professionals (such as a law firm)
Effect of conversion of company into LLP
A private company or an unlisted public company are allowed to be converted into LLP in accordance with the provisions of the LLP Act. Upon such conversion, on and from the date of certificate of registration issued by the Registrar in this regard, the effects of the conversion shall be such as are specified in the LLP Act. In certain cases, there are certain exemptions available from capital gains tax on conversion into an LLP.
On and from the date of registration specified in the certificate of registration of the LLP, the entire undertaking of the firm or company (including all tangible (moveable or immoveable) and intangible property, assets, rights, liabilities) shall be transferred to and shall vest in the LLP without further action. Further, the company shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be.

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