what are the advantage of converting private limited company into LLP?
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-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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-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
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:
โข 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.
โข Upto date filing of Income tax returns & Annual returns with RoC
โข consent of all the unsecured creditors for the proposed conversion
โข The partners receive consideration only by way of allotment of shares in LLP
โข Minimum 2 Designated Partners
โข Atleast 1 of the designated partners shall be an Indian Resident
โข If a body corporate is a partner, it has to nominate a natural person as its nominee
โข The Partners and Designated Partners can be same person
โข There is no concept of share capital, but there has to be some sort of contribution from each partner
โข DPIN (Designated Partner Identification Number) for all the Partners
โข DSC (Digital Signature Certificate) for all of the Designated Partners
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.