LLP to Private Limited & Vice Versa

Section 366 of the Companies Act 2013 enables an existing entity (including an LLP) to register as a company — effectively converting into it. The conversion is not a winding-up followed by a fresh incorporation. The LLP is dissolved automatically at the moment the new company's Certificate of Incorporation is issued. The new company assumes all of the LLP's assets, liabilities, contracts, and rights by operation of law — without a formal transfer or assignment for each individual asset. This continuity is the principal advantage of conversion over a wind-up and re-incorporation.

An LLP is constituted by partners who hold 'partnership interests' — not shares. It has no share capital, no authorised capital, and cannot issue equity shares to investors. Institutional investors (angels, VCs, PE funds) invest in equity shares of companies — they receive specific rights (anti-dilution, liquidation preference, board representation) attached to those shares. These rights do not exist in an LLP structure. An LLP also cannot issue ESOPs — employee stock options are structured as the right to acquire shares at a predetermined price, which requires a share-based structure. An LLP cannot comply with these requirements. Conversion is the only way to access these mechanisms.

Yes. Under Rule 3 of the Companies (Authorised to Register) Rules 2014, the consent of all partners of the LLP is required for conversion. The LLP Agreement may specify additional requirements — a meeting, a vote, a supermajority. If a partner dissents and cannot be persuaded, the conversion cannot proceed. This is one of the most important pre-conversion checks — PNPC assesses partner consent feasibility before advising to proceed. In cases of a dissenting minor partner, the LLP Agreement may have a mechanism for buyout at fair value that can precede the conversion.

Before filing URC-1, the LLP must publish a notice of its intention to convert in at least two newspapers — one circulating in English and one in a regional language in the state where the LLP's registered office is located. This notice invites any creditor or interested party to object to the conversion within 30 days. The advertisement proofs (clipping + publisher's certificate) are a mandatory attachment to URC-1. Without these attachments, the filing is rejected. The 30-day creditor objection window from the advertisement date is a statutory minimum — it cannot be shortened.

In principle, yes — Section 366 and the applicable rules provide that the new company assumes all assets, liabilities, and obligations of the LLP by operation of law. This means most contracts, leases, and obligations vest in the new company without requiring a formal transfer. However: (1) some contracts explicitly restrict assignment without counterparty consent — these require a formal novation or consent from the other party; (2) government licences, registrations, and permits are often entity-specific and must be re-applied for in the new company's name; (3) bank accounts are in the LLP's name and must be transitioned to the new company. PNPC identifies material contracts and licences that require explicit novation action.

The conversion requires the parties to agree on the shareholding pattern of the new company — which partner receives how many shares and at what value. Typically, the partners' capital balances in the LLP at the date of conversion serve as the basis for share allocation. The new company's paid-up share capital at the time of incorporation equals the LLP's net assets (assets minus liabilities) at the conversion date. If partners have unequal capital balances and want an equal shareholding, adjustments must be made to the capital accounts before conversion. PNPC advises on the most tax-efficient structure for this allocation.

The LLP's PAN is linked to the LLP as a legal entity — it becomes inactive once the LLP is dissolved upon conversion. The new Private Limited Company receives its own PAN (auto-generated at the time of incorporation through SPICe+). The LLP's PAN should not be used for any transaction after the conversion date. The LLP's GSTIN similarly cannot be used by the new company — a fresh GST registration must be applied for in the new company's name. Final GST returns must be filed for the LLP up to the conversion date before the GSTIN is surrendered.

PNPC drafts custom MoA and AoA for every company conversion — not a template. For an LLP that is converting specifically to raise equity, the MoA objects must be precisely stated to cover the business being conducted, and the AoA must include investor-friendly provisions: pre-emption rights on share transfer, drag-along and tag-along provisions, anti-dilution protections (if appropriate at this stage), and the framework for an ESOP scheme. A template AoA from a portal will not include these clauses and will require amendment before the first investor signs a term sheet — at the cost of a shareholder resolution and RoC filing. PNPC gets this right at conversion.

Under Section 47(xiiib) of the Income Tax Act 1961, the transfer of a capital asset (by the LLP to the company upon conversion) is not regarded as a 'transfer' for capital gains purposes — provided certain conditions are met: (a) all assets and liabilities of the LLP are transferred to the company; (b) all partners of the LLP become shareholders of the company in the same proportion as their capital account balances; (c) the partners do not receive any consideration other than shares in the company; and (d) the partners continue to hold at least 50% of the total voting power in the company for 5 years. If these conditions are met, no capital gains tax arises on conversion. If any condition is violated in the 5-year lock-in period (e.g., partner sells more than 50% of shares within 5 years), the exemption is withdrawn and capital gains become taxable.

Yes, if the lenders provide a no-objection certificate. The newspaper advertisement process explicitly invites creditors — including banks — to object within 30 days. A bank with an outstanding loan secured by LLP assets will typically require the new company to formally assume the loan facility and provide equivalent security. PNPC coordinates with the banking relationship to obtain the required NOC and to structure the loan assumption by the new company. Attempting conversion without lender NOC when there is a secured loan outstanding is legally risky and practically blocked by the URC-1 attachment requirements.

On conversion, the shareholding pattern of the new company mirrors the capital account ratios of the LLP partners. This is also the time to design the cap table for the company's next chapter: if an ESOP pool is being created, shares can be reserved in the authorised capital at the time of conversion; if a new co-founder or key employee is being brought in, the initial shareholding can be structured to accommodate this. The AoA should include the ESOP framework from the start. PNPC advises on the post-conversion cap table design — it is far easier to set up the structure at conversion than to add it later.

The Private Limited Company has materially higher compliance obligations than an LLP: (1) statutory audit is mandatory regardless of turnover (LLP: only above ₹40 lakh turnover or ₹25 lakh contribution); (2) Annual General Meeting within 6 months of FY-end; (3) Form AOC-4 and MGT-7 on MCA annually, in addition to the ITR-6; (4) minimum 4 Board meetings per year with proper minutes; (5) DIR-3 KYC for all directors annually by 30 September; (6) DPT-3 annual deposit return. These costs are recurring. PNPC prepares a detailed annual compliance cost estimate for the new company at the time of conversion — so the founders can plan their operating budget.

Yes. PNPC manages the entire conversion lifecycle: pre-conversion LLP review and filing regularisation; partner consent documentation; creditor NOC and newspaper advertisement arrangement; name clearance; custom MoA and AoA drafting; URC-1 and SPICe+ preparation and filing; RoC query response; receipt of COI; post-conversion setup (INC-20A, ADT-1, new bank account, share certificate issuance); GST migration; and identification of contracts requiring novation. Where the conversion is driven by an investor round, PNPC coordinates the conversion timeline with the investor's due diligence timeline. The engagement is priced on a fixed-fee basis, confirmed in writing before work begins.