A Comprehensive Guide to the Conversation Process of PVT. Ltd. Company to LLP

05 February 2026

The conversion of a private limited company into a limited liability partnership is a strategic process. The desire to achieve greater operational flexibility and the least compliance burden often leads to this decision. Though a private limited structure is ideal if your aim is expansion or raising venture capital, an LLP offers lucrative opportunities to enjoy limited liability without undergoing the rigid procedural requirements that the Companies Act mandates.

Let’s share a comprehensive guide to inform you about this conversion process, its prerequisites, and tax-related challenges.

Why Convert? The Strategic Shift

So! Why do you need this conversion? Here are some of the most common reasons that lead many companies to follow this dream:

• No Dividend Distribution Tax (DDT): LLPs can fearlessly distribute profits among partners without enduring tax implications that may be applied over corporate dividends. 
• Lower Compliance: Unlike a PVT Ltd., an LLP discards the mandatory requirement to generate exhaustive minute books. Nor do you need to hold statutory meetings after that conversion. Overall, it eliminated struggling with multiple stringent filing requirements.
• No Audit Requirement: An LLP does not need to conduct an audit unless its turnover surpasses INR 40 lakhs or the contribution passes over INR 25 lakhs.

Prerequisites for Conversion

The conversion requires the following conditions to be met for initiation.

1. Consent: All shareholders of the PVT Ltd. company must agree to the conversion process.
2. No Security Interest: The company must not have a subsisting security interest on its assets when you apply for the conversion.
3. Up-to-Date Filings: All statutory filings (annual returns and financial statements) must be registered with the Registrar of Companies (ROC) till the conversion occurs.
4. Identity of Partners: Only the shareholders of the company will be its partners when the LLP forms. Until conversion, no external person can be its partner.

The Step-by-Step Processes

1. Board Meeting and Digital Signatures

The conversion process begins with a board meeting where they agree to pass a resolution for the conversion. The stakeholders must procure a valid Digital Signature Certificate of their own. Moreover, they can use their Director Identification Number (DIN) as a Designated Partner Identification Number (DPIN).

2. Name Reservation (RUN-LLP)

The conversion process allows you to retain the same name or intended one via the RUN-LLP (Reserve Unique Name) online form. The condition is that it must end with “LLP,” such as “XYA Private Limited,” which will be “XYA LLP.”

3. Filing the Conversion Application (Form 18)

It’s the main conversion process where you need to fill out Form 18 to apply for the conversion of a company into an LLP. It must be enclosed with these documents:

• Statement of shareholders (consent).
• Statement of Assets and Liabilities certified by a Chartered Accountant.
• List of all creditors and their consent to the conversion.
• Photocopy of the acknowledgement or confirmation of the latest income tax return.

4. Incorporation Filing (FiLLiP)

Likewise, another form must be filled out called Form FiLLiP (Form for Incorporation of Limited Liability Partnership). It can be filled with or after the approval of the company’s name. In this form, you need to input the registered office details, the partner contributions, and the appointment of designated partners.

5. Finally Register & Get a Certificate of Incorporation

Once the ROC confirms that the application has successfully met all legal requirements, a Certificate of Incorporation is issued. It officially announces the setup of the LLP. However, the process is yet to be completed.

6. Drafting and Filing the LLP Agreement (Form 3)

Now, the partners must officially implement an LLP agreement within a month of incorporation. It contains the governing rights, duties, and profit-sharing ratios of the stakeholders. This is also an agreement to fill out the ROC in the form. 3.

Crucial Post-Conversion Tasks

Now comes the crucial phase when you must inform other authorities about the receiving of the certificate.

• Unfold the Conversion to ROC: Visit the Registrar of Companies office to inform it that your company has been officially transformed into an LLP. Use Form 14 for it.
• Update Registrations: Revise your PAN, TAN, GST registration, bank accounts, and any existing licenses like MSME or IEC to ensure that the converted company name and status are updated everywhere.
• As-Is Asset Transfer: The conversion will automatically vest all assets and liabilities of the PVT Ltd. in the name of the LLP. But physical records like property titles may need some extra effort. Visit the local sub-registrar’s office for the revision.

Tax Implications and Section 47(xiiib)

Ultimately, taxation should be sorted. The Income Tax Act states that this conversion is free from capital gains tax provided it meets these conditions.

• The overall sales or turnover of that company in any three preceding years did not surpass INR60 lakhs.
• Similarly, the overall value of the assets of that company in any three preceding years did not leap INR 5 crores.
• The stakeholders, or shareholders, have nothing to do but to get a share in the LLP.
• The overall profit-sharing ratio of the shareholders in the LLP has been at least 50% for half a decade.

Conclusion

In essence, the conversion of a PVT Ltd company into an LLP is a strategic journey that brings along a lot of benefits encompassing business and tax efficiency.