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Benefits of conversion of a Private Limited Company into LLP

Transfer of assets and liabilities on conversion of a Private Limited Company into a Limited Liability Partnership (LLP) does not attract any capital gain tax on such transfer. Other key benefits upon conversion are mentioned below:

Tax Implication

  • Upon conversion to LLP, no Dividend Distribution Tax (DDT) will be applicable unlike in case of Companies.
  • LLPs attract audit requirements subject to certain threshold limit, whereas companies are liable to mandatory statutory audit.

Number of shareholders/partners

Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners.

Compliance requirements

There is no need of compliances related to meetings and maintenance of huge statutory records.

Benefit of transfer

  • All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP.
  • No stamp duty is required to be paid as all movable and immovable properties of the company automatically vest in the LLP without any execution of instrument of transfer.
  • As stated above, no Capital Gains tax shall be charged on transfer of property from Company to LLP.
  • The goodwill of the Company and its brand value is being continued to enjoy by the LLP.

Carry Forward and Set off Losses and Unabsorbed Depreciation

The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected and such loss can be carried for further eight years in the hands of the LLP.

Taxmantra.com will assist you in all Business Incorporation & Maintenance issues including Creation of LLPs, Companies etc and also in post incorporation issues such as assistance in other registrations, ROC Compliances and others.

About: 

Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.

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