Advantages of both a company and a partnership firm are available in a LLP. By converting one’s business into LLP, the sole proprietor will be able to distribute the risks that were earlier borne by him alone with his partners. LLP allows a proprietor to set up a business which has a distinct legal identity and a limited risk.
Procedure for Conversion
A sole proprietorship cannot be converted into a LLP. Therefore, a new LLP has to be incorporated which will take over the sole proprietorship business.
Steps to incorporate a LLP are:
The approved name of LLP shall be valid for a period of 3 months from the date of approval.
No. One of the requisite of an LLP is to carry on business for profit.
If the LLP has a turnover of Rs.40 lakhs or more and/or has a capital contribution of Rs.25 lakhs or more, the financial statements should be audited.
Every LLP is required to maintain annual accounts reflecting true and fair view of its state of affairs. A statement off accounts and solvency shall be filed by every LLP with the registrar of LLP every year.
All tangible as well intangible property vested in the firm, all assets, interests, rights, privileges, liabilities, obligations relating to the firm and the whole of the undertaking of the firm shall be transferred to and shall vest in the LLP without further assurance, act or deed.
The accumulated loss and unabsorbed depreciation of firm is deemed to be loss/depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.
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