Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The legal route
Conversion happens by registering the LLP as a company under Section 366. You need consent of the partners, a name approval, a newspaper advertisement inviting objections, a no-objection from creditors, and the incorporation forms. The LLP’s assets and liabilities pass to the new company by operation of law.
The tax conditions
The conversion can be tax-neutral if conditions are met — broadly, the assets and liabilities transfer as they are, the partners become shareholders in the same proportion, and they retain their holding for a set period. Get these wrong and the transfer can trigger capital gains. Confirm the current conditions before converting, as they are strict.
Why and when — an example
The usual trigger is fundraising: a fund will not invest in an LLP, so an LLP with traction converts to a Private Limited company before its seed round. Plan it a few months ahead, because the name approval, the advertisement and the no-objections take time — you cannot do it overnight to meet an investor’s deadline, which is why it pays to start early once a raise looks likely. After conversion you also pick up company annual filings and a mandatory statutory audit from the first year, so the running compliance steps up too. See why investors prefer a company. Our startup service can manage the conversion.