How to Convert a Private Limited Company into an LLP in India

A Private Limited Company (Pvt Ltd) is one of the most popular business structures in India due to its credibility, limited liability, and investor-friendly nature. However, over time, some businesses find that the compliance burden, higher costs, and complex regulations of a private limited company outweigh its benefits.

For such businesses, converting into a Limited Liability Partnership (LLP) offers a cost-effective and flexible alternative. In this article, we provide a step-by-step guide on how to convert a Pvt Ltd company into an LLP in India in 2025, covering eligibility, process, documents required, tax implications, and compliance requirements.

 

Why Convert a Pvt Ltd Company into an LLP?

Many entrepreneurs choose conversion to an LLP because it combines the benefits of a partnership and a company structure. Here’s why businesses consider it:

• Lower Compliance Requirements: LLPs have fewer MCA filings compared to Pvt Ltd companies.
  
  
• Cost-Effective: Reduced compliance and audit costs.
  
  
• Flexibility: LLP partners can decide profit-sharing ratios freely.
  
  
• No Minimum Capital Requirement: Unlike Pvt Ltd companies, LLPs don’t require a minimum paid-up capital.
  
  
• Separate Legal Entity: LLP retains limited liability benefits like a Pvt Ltd company.
  
  
• Tax Advantages: No Dividend Distribution Tax (DDT) and flexibility in profit withdrawal.

 

Eligibility Criteria for Conversion

Before applying for conversion, ensure your Pvt Ltd company meets the following conditions:

1. All Shareholders Must Consent: Every shareholder must become a partner in the LLP.
   
   
2. No Existing Security Interest: The company should not have any secured loans or charges on assets.
   
   
3. No Pending ROC Filings: All MCA annual filings must be up-to-date.
   
   
4. Minimum Partners: At least two designated partners are required (one must be an Indian resident).
   
   
5. Regulatory Approvals: If engaged in regulated sectors (finance, banking, insurance, etc.), prior approval may be required.

 

Step-by-Step Process to Convert a Pvt Ltd into an LLP in India (2025)

Step 1: Obtain Digital Signature Certificates (DSC)

• All proposed partners must obtain valid DSCs.
• Required for signing e-forms online.

Step 2: Apply for Director Identification Number (DIN)/Designated Partner Identification Number (DPIN)

• Existing directors can use their DIN for conversion.
• New partners (if any) must apply for DPIN.

Step 3: Conduct a Board Meeting

• Pass a Board Resolution approving conversion.
• Approve draft LLP agreement and authorize directors to file conversion applications.

Step 4: Name Reservation for LLP

• Apply through RUN-LLP (Reserve Unique Name) service on MCA portal.
• The proposed LLP name must comply with MCA naming guidelines.

Step 5: File Conversion Application with MCA

• File Form FiLLiP (Form for Incorporation of LLP) with MCA along with Form 18 (application for conversion of company into LLP).
• Attach required documents (explained below).

Step 6: Attach Mandatory Documents

• Consent of all shareholders.
• Latest financial statements.
• Statement of assets and liabilities (certified by CA).
• List of shareholders and proposed partners.
• Approval/NOC from secured creditors (if any).
• Copy of Board Resolution.

Step 7: Filing LLP Agreement

• Draft and file the LLP Agreement within 30 days of incorporation.
• Agreement must include:
  • Profit-sharing ratio
  • Rights and duties of partners
  • Capital contribution details

Step 8: Certificate of Registration

• Once approved, MCA issues a Certificate of Registration of LLP.
• The Pvt Ltd company is officially converted into an LLP.

Post-Conversion Compliance

After conversion, certain steps must be completed to ensure smooth transition:

1. Intimate Authorities: Inform income tax department, banks, and vendors about conversion.
2. PAN & TAN Update: Apply for changes in PAN and TAN with NSDL.
3. GST Registration Amendment: Update GST registration with new LLP details.
4. Close Company Bank Account: Open a new bank account in the LLP’s name.
5. Transfer of Assets & Liabilities: All assets, contracts, and liabilities of the Pvt Ltd company automatically vest in the LLP.

Tax Implications of Conversion

1. Capital Gains Tax: Conversion is tax-neutral if conditions under Section 47(xiiib) of the Income Tax Act are met.
   
   
2. Carry Forward of Losses: Allowed only if the conditions of Section 47(xiiib) are satisfied (e.g., no consideration other than LLP shareholding).
   
   
3. Stamp Duty: Payable on transfer of immovable property, depending on state laws.
   
   
4. GST Compliance: No GST is charged on transfer of assets during conversion.

 

Documents Required for Conversion

• Incorporation documents of Pvt Ltd company.
• Latest audited balance sheet.
• List of shareholders and consent letters.
• Statement of assets and liabilities (certified).
• Proof of registered office address.
• DSC and DIN/DPIN of all partners.
• Draft LLP Agreement.

 

Timeline & Cost for Conversion (2025)

• Timeline: 20–25 working days (if all documents are in order).
• Government Fees: ₹5,000–₹10,000 depending on state stamp duty.
• Professional Fees: Varies from ₹10,000–₹20,000 depending on consultant.

 

Advantages of Conversion into LLP

• Reduced compliance burden (fewer MCA filings).
• Flexibility in profit sharing.
• Lower cost of maintenance.
• No mandatory statutory audits (unless turnover > ₹40 lakh or capital > ₹25 lakh).
• Tax-friendly structure for small and medium businesses.

 

Disadvantages of Conversion

• Limited fundraising opportunities compared to Pvt Ltd.
• Less attractive to investors and venture capitalists.
• Certain sectors may not permit LLP structures.

 

FAQs on Conversion of Pvt Ltd into LLP

Q1. Can all Pvt Ltd companies be converted into LLPs?
No. Companies with secured loans or pending ROC filings cannot be converted.

Q2. How long does the conversion process take?
Usually 20–25 working days depending on documentation and MCA approval.

Q3. Is conversion into LLP taxable?
If Section 47(xiiib) conditions are met, the conversion is tax-neutral.

Q4. Do all shareholders of Pvt Ltd have to become LLP partners?
Yes. All shareholders must become partners in the LLP.

Q5. Can a converted LLP raise funds from investors?
Yes, but LLPs are less preferred by VCs compared to Pvt Ltd companies.

 

Conclusion: Simplify Your Pvt Ltd to LLP Conversion with India Company Setup

Converting a Private Limited Company into an LLP in India can be a smart move for businesses looking to reduce compliance burden and operational costs. However, the process involves multiple filings, documentation, and adherence to MCA and tax laws.

At India Company Setup, we provide end-to-end assistance for:

• Pvt Ltd to LLP conversion.
• Drafting LLP Agreement.
• Filing conversion forms (FiLLiP & Form 18).
• Tax advisory and post-conversion compliance.

Avoid costly mistakes and delays. Contact us Now! Call 9915731447 today and let our experts manage the entire conversion process while you focus on growing your business.