How to Convert a Partnership Firm into an LLP or Private Limited Company

Many traditional partnership firms in India begin with informal agreements and minimal compliance. But as the business grows, so does the need for legal structure, credibility, funding options, and liability protection. That’s when converting a regular partnership firm into a Limited Liability Partnership (LLP) or Private Limited Company becomes a smart legal step.

Both LLPs and Private Limited Companies provide limited liability to the owners—but they differ in compliance levels, management style, and fundraising potential.

Here’s a detailed guide to help you choose the right conversion path and understand the legal process.

🤝 Why Convert a Partnership Firm?

A partnership firm may want to convert into a formal business entity because of:

• Unlimited liability in traditional firms

• Inability to raise structured investment

• Lack of legal identity separate from partners

• Absence of perpetual succession

• Increasing business scale and risk

🔄 Option 1: Convert Partnership Firm to LLP

An LLP is ideal for professional services, consultants, and family-owned businesses that want limited liability without the heavy burden of corporate compliance.

✅ Basic Requirements:

• All existing partners must become designated partners in the LLP

• Consent of all partners is needed

• Latest Income Tax Returns and NOC from Registrar of Firms

📋 Step-by-Step Procedure:

1. Obtain Digital Signature Certificates (DSC) for all partners

2. Apply for DPIN (Designated Partner Identification Number)

3. Name Approval through RUN-LLP portal

4. File Form FiLLiP (Incorporation application)

5. File Form 17 and Form 2 for conversion of the firm

6. Execute LLP Agreement within 30 days of incorporation

7. ROC Issues Certificate of Registration

📌 Once registered, the old partnership is deemed dissolved and its assets and liabilities are transferred to the LLP.

🏢 Option 2: Convert Partnership Firm to Private Limited Company

For firms planning to expand rapidly, raise funding, or enhance brand reputation, converting into a Private Limited Company is the right choice.

✅ Basic Requirements:

• At least two directors and shareholders (can be same persons)

• Digital signatures, DINs, PANs of all directors

• Consent from existing partners

• Clear title or NOC for registered office

• NOC from Registrar of Firms

📋 Step-by-Step Procedure:

1. Pass a resolution in the firm to convert

2. Obtain DSC and DIN for all directors

3. Apply for Name Approval via SPICe+ Part A

4. Prepare incorporation documents including MOA, AOA

5. File SPICe+ Part B, Form URC-1 and other linked forms

6. Attach details of assets, liabilities, and partners

7. ROC Issues Certificate of Incorporation

📌 The company must mention in its MOA that it is being incorporated as a result of conversion from a partnership.

⚖️ Legal Effects of Conversion

• The existing PAN, TAN, GST, and bank accounts may need to be re-applied for

• All assets, liabilities, and contracts are transferred to the new entity

• The old firm is dissolved and cannot carry on business

• You must inform the Registrar of Firms and Tax Departments

• All approvals from government authorities must be updated

🧾 Documentation Required

• Partnership Deed

• NOC from creditors and partners

• Consent letters

• IT return acknowledgment

• Latest balance sheet

• Utility bill and rent agreement for office address

• Passport-size photos and ID proofs of partners/directors

🧠 Which Is Better: LLP or Pvt Ltd?

Criteria	LLP	Private Limited Company
Compliance	Lower	Higher
Liability	Limited	Limited
Funding	Not allowed	Can raise equity
Conversion Simplicity	Easier	Slightly more complex
Suitable For	Professionals, SMEs	Startups, tech firms, investors

👨‍⚖️ Why Choose Barowalia & Associates

Navigating a conversion without expert legal help can lead to missed filings, penalties, and loss of rights. At Barowalia & Associates, we provide:

• ✅ End-to-end assistance in firm-to-LLP or Pvt Ltd conversion

• ✅ ROC filing, name approval, agreement drafting

• ✅ Tax registration updates and transition support

• ✅ Legal due diligence for assets and liabilities

• ✅ Advice on choosing the ideal structure for your long-term goals