Conversion of Proprietorship to Limited Liability Partnership

Conversion of Proprietorship to Limited Liability Partnership

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Conversion of Proprietorship to Limited Liability Partnership - Process, Procedure, Document Required, Fees, Eligibility, Duration

A Proprietorship firm generally converts to a Limited Liability Partnership (LLP) to reduce its liabilities. An LLP is a business that has a minimum of two members and has no upper limit on the number of members. After conversion to an LLP, individual partners are safeguarded from joint liability produced by another partner's misconduct since no partner is liable for the illegal actions of other partners. A Proprietorship of professionals, micro and small businesses that are family-owned or closely-held typically prefer the LLP form of business.

Proprietorships convert to an LLP to take their business to the highest level. When a Sole Proprietorship converts to an LLP, there forms a joint venture made up of partners whose liability is restricted to the capital invested by each. The personal property of the partners is not liable for the firm's debts under an LLP. So, an LLP has a broader scope of business than a Proprietorship which pushes it to convert to LLP.

Key points of LLP

  • An LLP must have at least two members. There is no limit to the number of people who can be a part of it.
  • The Limited Liability Partnership's members have limited liability.
  • An LLP is a corporate body with a legal entity apart from the partners who are members of the organization.
  • An LLP can be established with a little amount of cash.
  • The LLP is not required to pay tax on the income and share of its partners.
  • In comparison to other types of businesses, the cost of registering an LLP is modest.

Documents required for conversion to LLP

The following are the documents required for conversion of Proprietorship to LLP:

  • PAN Card
  • Aadhar card
  • Photograph of all the Directors
  • Electricity Bill
  • Company address proof

Conversion of Proprietorship to Limited Liability Partnership - Get Expert Advice

Conversion of Proprietorship to Limited Liability Partnership - Get Expert Advice

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Conversion of Proprietorship to Limited Liability Partnership Frequently Asked Questions

A Sole Proprietorship that converts to an LLP has the following benefits: Liability: When opposed to a Sole proprietorship, an LLP form reduces liability. In an LLP, partners' liability is restricted to the amount of capital contribution agreed upon by the partners. LLP's loss or debt cannot be transferred to partners. One partner is not held liable for the actions of another partner's negligence or misbehavior. Organized: The LLP is administered and operated by the LLP agreement. Here, the partners decide how the LLP will operate and how the roles and obligations will be divided. This gives flexibility to the nature of the business to an LLP. Assets: An LLP is a separate legal entity. It can enter into contracts and possess property in its name. No complication: A Limited Liability Partnership is easier to start. It has a lesser cost of registration compared to other companies. The LLP can be started with minimum capital. Audit: A Limited Liability Partnership does not require compulsory audit like other companies. Existence: The LLP can continue to exist even if the partners change or die. It has a perpetual succession.
Because there is only one person in a Sole Proprietorship, it cannot be changed straight into an LLP. An LLP requires a minimum of two partners. It is possible to do this by either dissolving the proprietorship, creating an LLP, or by incorporating another person into the business and making them a partner before converting it to an LLP. If you want to convert your Sole Proprietorship firm into an LLP, you can contact Credence Corporate Solutions. We have a team of experts who will help you in converting your Sole Proprietorship firm into an LLP. Contact us today and we would be pleased to help you.

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