What It Is?
Proprietorship To Partnership
Sole proprietorship is owned by an individual and he/she is personally liable for all the debts and responsibilities of the firm and the business. Although it has many advantages, few of its limitations lead to situation where its conversion to other entity may be required. The prime reason to convert a Sole Proprietorship firm to a Partnership may be to join hand with another person to grow the business with value addition in terms of expertise or capital intoduction.
The characterstics of Conversion from Proprietorship to Private Limited
Liabilities will be divided among the partners involved.
Debts and Responsibilities are shared
Minimal Compliances
Flexible Agreement
Additional Benefit in terms of Growth of Business
Easy to Windup
Below are the pre-requisite to conversion of Sole Proprietorship to Partnership
Minimum Two Partner
Name of Partnership
No FDI is allowed
Minimum Capital
Registered Office
Why?
Any two-person can form a Partnership
Any Sole Proprietorship can convert their business into a partnership subject to a minimum two-person is involved
After decided to form an LLP, here are the step:-
Step 1:- TWO PARTNER
Step 2:- Drafting PARTNERSHIP AGREEMENT
Step3:- Apply for TAN & PAN
Step 4:- Open Bank Account
FAQs
1. What is the Eligibility of designated Partner/Partners in an LLP?
Any individual, or even a company or an LLP, can become a partner. However, only an individual can become a ‘designated partner’ in an LLP.
2. I am NRI. Can I start an LLP Business in India?
Yes, non-resident Indians and foreign nationals who are willing to enter into an LLP partnership can do so, provided they submit the necessary documents after getting it notarized by the concerned authorities. Although, at least one of the designated partners in an LLP should be an Indian national.
3. What are the rules of starting an LLP?
Any group of persons who have or want to invest money in a business can start an LLP. A person or an investor becomes a partner, according to the LLP agreement, as provided in the Act of 2008. Also, the investors/partners are owners of the business started under the LLP.
4. What is an LLP Agreement?
An LLP agreement is one that is made between the partners and the LLP regarding the relationship between the individual partners in the LLP. An LLP agreement usually consists of management policies, inclusion of new partners, policy making strategies, and so on.
5.What is the minimum partner of Partners required to Start LLP?
According to the LLP Act, a minimum of two designated partners are required to start an LLP. The designated partners are responsible for fulfilling all the essential requirements involved in starting and running an LLP.
6. What Kind of Startup commonly register LLPs?
Typically, only start-ups that will not be looking for venture capital funding register LLPs. This is because venture capitalists only invest in private and public limited companies.
7. Is it Cheaper to run an LLP than a private limited company?
Yes, it is much cheaper to run an LLP than a private limited company, particularly in your early start-up days. This is because many compliances, such as an audit, apply to LLPs only after their turnover is sizeable. Most LLPs spend about half as much as a private limited company in their first year on registrations and compliance work.
8. What are the Key difference between LLP and a Private Limited Co?
Get to know the key differences between an LLP and a Private Limited company in detail.
9. What is an LLP as a whole?
A Limited Liability Partnership or LLP is one of the business entities that combines the elements of both – partnership firms and corporations and is viewed as a corporate hybrid. LLP companies enjoy the flexibility of organizing their own managerial structure based on mutual understanding as one partner is not solely liable to the liabilities or misconduct of another partner. Unlike Private limited companies and Limited companies that are governed by the Companies Act, LLPs are regulated by the Limited Liability Partnership Act 2008. These companies form a common LLP agreement and operate accordingly.
10. How does LLP Registration work for Foreign Director?
Usually, Non-resident Indians or NRIs and foreign nationals who wish to start or do investment in India mainly go for a private limited company. This is because private limited companies allow for 100% Foreign Direct Investment (FDI) under the automatic route for many of the sectors. Though the cost for incorporation of a private limited company is relatively low compared to limited liability partnership (LLP) companies, the effort required to maintain compliance was an inhibiting factor. In order to allow NRIs and foreign nationals to freely invest in businesses in India and improve foreign investment, the Government has allowed 100% FDI in LLP under the automatic route.
11. How I can dissolve the sole Propreitorship?
Through Decleration but there is no mandatory prescribe way for the conversion as such. However, the only way to do it is by entering into a new partnership.
The partners then can add “Clause” in the partnership ageement/ deed stating that the sole proprietorship’s assets, business liabilities and dues, creditors and debtors are transferred at book value to the partnership and the sole proprietorship would be dissolved automatically. Hence, the partnership would now carry on the business of the sole proprietor.
12. Is there any duration of partnership is mandatory?
Many times, partnerships are created for a specific cause or a project. Once the said purpose is fulfilled, the partnership comes to an end. If there is any situation involved in the conversion of proprietorship, the deed should include the reason and the time period until which the partnership would be functioning.
13. Partnership can be registered?
Yes, if partners wish to register the firm then , they can ap