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what are the advantage of converting private limited company into LLP?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 kruthika asked over 2 years ago

what are the advantage of converting private limited company into LLP?

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

-LLPs attract audit requirements subject to certain threshold limit, whereas companies are liable to mandatory statutory audit. Number of shareholders/partners Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

-Upon conversion to LLP, no Dividend Distribution Tax (DDT) will be applicable unlike in case of Companies. -LLPs attract audit requirements subject to certain threshold limit, whereas companies are liable to mandatory statutory audit. Number of shareholders/partners Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners. Compliance requirements There is no need of compliances related to meetings and maintenance of huge statutory records. Benefit of transfer

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered over 2 years ago

Conversion of Private Company into LLP Key Benefits: A) Tax Benefits The most important reason for conversion of a company into an LLP is on the tax front. Currently, the Income-tax Act, 1961, provides for payment of minimum alternate tax (MAT) as also for payment of dividend distribution tax (DDT) by companies. An LLP, which is not a company, should not be liable to pay MAT or DDT. B) No Limit on number of shareholders/partners Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners. C) Minimal Compliance Level & Cost effective model There is no need of compliances related to meetings and maintenance of huge statutory records. D) Automatic transfer All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP. E) No Stamp Duty All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid. F) No Capital Gain Tax No Capital Gains tax shall be charged on transfer of property from Company to LLP. G) Continuation of Brand Value The goodwill of the Company and its brand value is kept intact and continues to enjoy the previous success story with legal recognition. H) Carry Forward and Set off Losses and Unabsorbed Depreciation The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP. Key requirements: • On Conversion, all the members/shareholders of the company shall become partners of the LLP in the same proportion in which their capital accounts stood in the books of the company on the date of the conversion. • Upto date filing of Income tax returns & Annual returns with RoC • consent of all the unsecured creditors for the proposed conversion • The partners receive consideration only by way of allotment of shares in LLP • Minimum 2 Designated Partners • Atleast 1 of the designated partners shall be an Indian Resident • If a body corporate is a partner, it has to nominate a natural person as its nominee • The Partners and Designated Partners can be same person • There is no concept of share capital, but there has to be some sort of contribution from each partner • DPIN (Designated Partner Identification Number) for all the Partners • DSC (Digital Signature Certificate) for all of the Designated Partners

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

Dear Friend, > Advantage of Converting Pvt Limited into LLP Transfer of assets and liabilities on conversion of a Private Limited Company into a Limited Liability Partnership (LLP) does not attract any capital gain tax on such transfer. **Other key benefits upon conversion are mentioned below:** **Tax Implication** -Upon conversion to LLP, no Dividend Distribution Tax (DDT) will be applicable unlike in case of Companies. -LLPs attract audit requirements subject to certain threshold limit, whereas companies are liable to mandatory statutory audit. **Number of shareholders/partners** Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners. **Compliance requirements** There is no need of compliances related to meetings and maintenance of huge statutory records. **Benefit of transfer** -All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP. -No stamp duty is required to be paid as all movable and immovable properties of the company automatically vest in the LLP without any execution of instrument of transfer. -As stated above, no Capital Gains tax shall be charged on transfer of property from Company to LLP. The goodwill of the Company and its brand value is being continued to enjoy by the LLP. **Carry Forward and Set off Losses and Unabsorbed Depreciation** The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected and such loss can be carried for further eight years in the hands of the LLP.

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