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⭐ Step-by-Step Process for Proprietorship to LLP Conversion

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Financial Analyst

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Step 1: Understand Eligibility and Requirements

Before beginning the conversion, ensure:

  • There must be at least two partners in the LLP.
  • One partner must be an Indian resident.
  • All assets, liabilities, and business interests of the Proprietorship will be transferred to the LLP.
  • The proprietor will become a partner in the LLP.

Proprietorships cannot be directly “converted” under a single statutory form. Instead, a new LLP is formed, and then the business is transferred.

Step 2: Apply for Digital Signatures (DSCs)

Since LLP incorporation is fully online:

  • All designated partners must have a Digital Signature Certificate (DSC).

DSC is required for filing incorporation forms on the MCA portal.

Step 3: Apply for DIN / DPIN for Partners

Each designated partner must obtain:

  • DIN (Director Identification Number) or
  • DPIN (Designated Partner Identification Number)

This can be applied directly within the FiLLiP (LLP incorporation form).

Step 4: Reserve Name for the LLP

Choose a name and apply through:

RUN-LLP (Reserve Unique Name) or

FiLLiP (combined with incorporation)

The name should:

  • Not resemble an existing LLP/Company
  • Comply with naming rules
  • Use “LLP” at the end

If you want continuity, you can use a name similar to the proprietorship with NOC.

Step 5: Draft the LLP Agreement

The LLP Agreement defines:

  • Partner roles & responsibilities
  • Profit-sharing ratio
  • Powers & rights
  • Capital contribution
  • Management structure

This must be executed on stamp paper and filed in Form LLP-3 after incorporation.

Step 6: Incorporate the LLP Using FiLLiP Form

File the FiLLiP (Form for incorporation of LLP) with MCA by attaching:

  • Consent of partners
  • Identity/address proofs
  • Registered office proof
  • NOC from owner (if rented property)
  • Details of business activity

Once approved, MCA issues:

  • Certificate of Incorporation (COI)
  • LLPIN

This marks the legal creation of the LLP.

Step 7: Transfer Assets & Liabilities from Proprietorship to LLP

After LLP formation:

  • Prepare a Business Transfer Agreement (BTA)
  • Transfer all assets, inventory, licenses, and contracts
  • Transfer bank balances and close old accounts
  • Ensure creditors are informed and approve the transfer

The entire business continues under the new LLP without disruption.

Step 8: Apply for PAN & Update Bank Account

LLP is a separate legal entity; therefore:

  • Apply for a new PAN for the LLP
  • Open a new LLP bank account
  • Update GST, MSME, and other registrations with new details

Funds from the proprietorship account may be transferred to the LLP.

Step 9: File LLP Agreement in Form 3

Within 30 days of incorporation, file:

  • Form LLP-3 containing the executed LLP Agreement

This is mandatory to avoid penalties.

Step 10: Update All Registrations & Compliances

Convert or update all existing registrations:

  • GST Registration – file amendment
  • MSME Registration – update entity type
  • Shops & Establishment License
  • Professional Tax Registration
  • Trademark ownership transfer (if any)
  • Import Export Code (IEC) update

Notify suppliers, customers, employees, and banks about the conversion.

Step 11: Maintain Proper Books & Compliance as LLP

After conversion, LLP must comply with:

  • Annual Return (Form 11)
  • Statement of Accounts & Solvency (Form 8)
  • Income Tax Return filing
  • Maintenance of financial records
  • Compliance with LLP Agreement

This ensures smooth operations and legal standing.

Conclusion

Converting a Proprietorship into an LLP is a strategic move for businesses aiming to grow while enjoying legal protection and professional credibility. By following this step-by-step process—from DSCs and name reservation to transferring assets and updating registrations—you can ensure a seamless transition into an LLP structure.

The information provided in this blog is for general informational and educational purposes only and should not be construed as legal, tax, or professional advice. While every effort has been made to ensure accuracy and compliance with the applicable provisions of the Companies Act, 2013 and related rules, laws and regulations may change over time and interpretations may vary based on specific facts and circumstances

All services are subject to applicable laws, rules, and government approvals prevailing at the time of execution.

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