Proprietorship Firm into LLP

While Sole proprietorship may appear to be the easiest form of business, there can be many reasons for which it becomes essential to convert it to LLP.

Definition: It is essential to comprehend the definitions

Sole proprietorship follows monopoly governance and has a sole owner.

• This is ideally the most convenient type of business, commonly chosen by small businesses and start-ups, and does not require shareholders or board of directors.
• The owner remains responsible for all the good things and bad things equally.
• For example, he receives all the profits and owns all the assets but has full responsibility for losses and debts

LLP stood for Limited Liability Partnership and was initiated through the LLP Act of 2008.

• As the name implies, here, some or all partners possess limited liabilities.
• In an LLP, one partner cannot be held accountable for another partner’s wrongdoing or negligence.

There can be numerous reasons for which conversion of sole proprietorship into LLP can be considered as a prudent business decision.

Flexibility to Operate: The responsibilities are divided between LLP partners, making the operation smooth.
More capital can be obtained: In LLP, you have a fair chance of getting more money from your partners as the capital required in the business can be huge, which may be difficult for you to manage alone.

• DSC (Digital Signature certificate) and self -attestation of the documents like address proof and identity proof is required
• An approved DPIN is a mandate.
• Pre Name search is important where it is to provide at least 6 (Six) names
• Application for name availability: it is required to draft the main object to be pursued by LLP post incorporation
• Need forms like LLP Agreement form 2, form 3, form 4 & 9, signed subscription sheet, duly stamped LLP agreement

Being owned by a single person, a sole proprietorship cannot be directly changed into an LLP. However, this has the bellow possible workarounds:

• The proprietorship can be closed, and LLP can be registered separately
• Another person can be included in the business and made a partner before converting it to LLP

Pan Card: This is required if you are an Indian citizen. For foreign residents, a passport is required.

Address proof: Aadhar Card/ Voter ID/ Passport/ Driving License is mandatory as a personal address proof

Photograph: Latest photograph is a mandate for conversion

Business Address proof: As a business address proof, the electricity bill or the telephone bill of the registered office address can be used.

Rent Agreement: The rent agreement is required for the conversion. (if applicable)

NOC from the owner: The owner needs to issue a NOC

NRI/Foreign National: For NRI or Foreign National, the documents must be notarized and apostilled.