Can LLP be Converted into a Private Limited Company in India?
Can LLP be Converted into a Private Limited Company in India?
Many entrepreneurs in India start their business journey with a Limited Liability Partnership (LLP) due to its ease of formation, low compliance, and flexibility. However, as the business grows and the need for external funding, equity infusion, or scalability arises, many start wondering —
“Can an LLP be converted into a Private Limited Company?”
The answer is: Yes, it is possible — but with specific legal processes and approvals.
Let’s understand how this conversion works, what legal provisions apply, and why businesses make this shift.
📌 Why Convert LLP to a Private Limited Company?
While LLPs are ideal for professional services and smaller setups, they have some limitations, such as:
• Ineligibility to issue shares or take equity investments.
• Difficulty in raising venture capital or foreign direct investment (FDI).
• Restrictions on growth and expansion plans.
A Private Limited Company (Pvt Ltd), on the other hand, offers more credibility, better funding options, and brand value. Hence, many growing LLPs consider conversion to unlock the potential of becoming a full-fledged corporate entity.
⚖️ Legal Basis for Conversion
Currently, there is no direct provision under the LLP Act, 2008, to convert an LLP into a company. However, conversion is allowed under Section 366 of the Companies Act, 2013, which deals with the registration of existing firms, including LLPs, as companies.
This route enables LLPs to become Private Limited Companies by following certain conditions and procedures laid down by the Ministry of Corporate Affairs (MCA).
✅ Conditions for Conversion of LLP to Pvt Ltd
To convert an LLP into a Private Limited Company, the following eligibility conditions must be met:
1. Minimum 2 Shareholders and Directors
- At least two members must be shareholders.
- At least two directors, one of whom must be a resident of India.
2. Consent of Partners
- All partners of the LLP must give their written consent for conversion.
3. Minimum 7 Partners in LLP (for Section 366 route)
- At least seven partners are required to initiate conversion under Section 366.
(Note: If fewer partners exist, the LLP may first increase its strength.)
4. No Existing Security Interest
- The LLP should not have any secured loans, or all secured creditors must provide NOCs.
5. Up-to-date Filing
- All ROC compliances, ITRs, and annual returns must be duly filed before initiating the conversion.
📋 Step-by-Step Process of Conversion
Here is a simplified version of the process:
1. Obtain Digital Signatures and DIN
Directors must have Digital Signature Certificates (DSC) and Director Identification Numbers (DIN).
2. Name Reservation
Apply for name approval through RUN (Reserve Unique Name) on the MCA portal.
3. Prepare MOA and AOA
Draft the Memorandum and Articles of Association as per company requirements.
4. File Form URC-1
Submit the conversion application using Form URC-1, along with:
• LLP agreement
• NOC from partners/creditors
• Statement of assets and liabilities
• List of all partners
5. Incorporation
File SPICe+ (INC-32) for incorporating the new Private Limited Company.
6. New CIN Issued
Once approved, you will receive a new Certificate of Incorporation with a Company Identification Number (CIN).
🏁 Post-Conversion Compliance
After conversion:
• The LLP ceases to exist.
• A notice must be published in newspapers within 30 days of incorporation.
• All existing assets, liabilities, and contracts of the LLP are transferred to the company.
✳️ Key Benefits of Conversion
• Access to venture capital and angel funding
• Separate legal identity with better brand recognition
• Eligibility for startup registration and tax benefits
• Ability to issue ESOPs and equity shares
👇 Conclusion
So, can an LLP be converted into a Private Limited Company?
Yes, absolutely — if the legal procedures are properly followed.
Conversion is an ideal choice for businesses looking to scale, attract investors, or formalize their operations. If you’re unsure whether to make the switch, consult a CA or legal expert who can guide you based on your goals and financial readiness.
