Conversion of format of corporate entity

Converting a Pvt Ltd Co to LLP or LLP to Partnership involves several steps. Here's a brief overview: Pvt Ltd Co to LLP:

1. Check eligibility: Ensure the company meets LLP Act requirements.

 2. Obtain DSC and DIN: Directors need a Digital Signature Certificate (DSC) and Director Identification Number (DIN).

3. Name approval: Reserve a unique name for the LLP. 

4. File Form 1: Incorporation document with the Registrar of Companies (ROC). 

5. File Form 18: Notice of conversion from Pvt Ltd to LLP. 

6. File Form 2: Statement of assets and liabilities. 

7. Obtain LLP registration certificate. 

8. Update PAN, TAN, and other registrations. LLP to Partnership:

 1. Check partnership deed: Ensure it allows conversion.

 2. Obtain consent: From all partners.

 3. File Form 15: Notice of conversion with the ROC.

 4. File Form 16: Statement of assets and liabilities.

 5. Obtain partnership registration certificate.

6. Update PAN, TAN, and other registrations. 

Dear Reader:
You would have to a board meeting and agree with all your shareholders. This should be done as per the Companies Act and the LLP Act 

 You shall file forms such as e-Form 18 and ensure that all your creditors are fine with this move. Essentially, everything needs to be working in order before the change.

And now comes the tax law provisions. Section 47(xiiib) of the Income Tax Act provides for an exemption from capital gains tax on conversion, but only if some strict conditions are met. For instance, the assets and liabilities of the company must seamlessly transfer to the LLP and the shareholders of the Private Limited Company become partners in the LLP without extra compensation. If you violate any of these provisions, Section 47A(4) will come into play and you could lose your exempt status.

A relevant case is CIT v. Taxspin Engg. & Mfg. Works, wherein the court illustrated that the conversion has to be managed so that the whole exercise is tax-neutral. If the asset transfers get entangled or all the conditions are not satisfied, then you may end up paying more in taxes than you had planned.

You cannot forget to renew the tax registrations and file the LLP agreement within 30 days of conversion. This is not an event that happens once, but it might assist in tidying up the business structure if handled correctly.

You most probably would want to talk to a company secretary or a tax professional to ensure smooth sailing here, so they can walk you through the paperwork and check everything's fine with all the rules.

If you need any more help, please contact me at sankalpt44@gmail.com

Best wishes in your business transition!