Question 4 : “Limited Liability Partnership (LLP) is a hybrid between company and partnership” Elaborate. Explain the procedure of conversion of a partnership firm to LLP and the consequences of such conversion under the Second Schedule. An LLP is running with one partner from 15thJuly 2020 till date. What are the consequences of doing so. Explain mentioning who can file the petition as well as powers of the Tribunal.
ANSWER : Features of LLP
The main features of LLP are:
LLP is a body corporate and a legal entity separate from its partners. The LLP has a perpetual succession.
The Rights & Duties of partners of an LLP and those of the LLP and its partners shall be governed by an agreement between partners or between the LLP and the partners.
The Liability of the partners is limited to their agreed contribution in the LLP which may be tangible or intangible in nature or both tangible & intangible in nature.
LLP shall maintain annual accounts reflecting the true and fair view of its state of affairs. A statement of accounts and solvency shall be field by every LLP with the Registrar every year.
The Central government has the power to investigate the affairs of an LLP, if required, by appointment of a competent inspector for the purpose;
The Indian Partnership Act, 1932 shall not be applicable to LLP’s.
Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India.
Steps for conversion of Partnership Firm into LLP:
Step by step guide for conversion of Partnership Firm into LLP:
Obtain Digital Signature for all the partners.
Generally partners in a Partnership Firm would not have a digital signature as the same is not necessary for the registration of a partnership firm.
Partners in LLP require a DPIN/DIN. Therefore obtain DPIN/DIN for all partners.
A DIN is a unique number for each person who is an LLP Partner or Director.
Make an application in RUN-LLP Form for name reservation on MCA website.
Before applying for reservation of name, applicant must check the rules for selection of LLP name.
File Form FiLLiP for Application and Statement for the Conversion of Partnership Firm into LLP.
The documents required for LLP registration and for Form FiLLiP.
Once the process of incorporation is complete by filing Form FiLLiP, the next step is to register the LLP Agreement with MCA.
File LLP Form 3 for LLP Agreement registration which contains details of LLP agreement along with partners resolution with MCA.
On successful conversion into LLP ROC shall issue Certificate of Incorporation of LLP.
Further when the LLP is incorporated and the Partnership Firm is converted the Partnership Firm would be deemed to be dissolved.
IF LLP carry the business with 1 person for more than 6 month then the person alone in the business shall be liable personally for the obligation of the LLP incurred during the period.
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