LLP Form 17: converting a partnership firm into an LLP

Who can convert using Form 17?

Any partnership firm, registered or unregistered under the Partnership Act, 1932, can convert into an LLP if all its partners agree and all of them become the LLP's partners. Nobody new can join at the moment of conversion, although partners can be added or removed later under the LLP agreement.

Conversion is popular with professional firms and family businesses that want limited liability and a separate legal entity without changing the people involved or transferring each asset by separate conveyance.

Documents attached to Form 17

Form 17 is signed by a designated partner and certified by a practising CA, CS or cost accountant. The incorporation details, proposed name, registered office and designated partners are filled in FiLLiP, which is linked to Form 17.

• Consent of all partners of the firm
• Statement of assets and liabilities of the firm, certified by a practising chartered accountant
• Copy of the latest income-tax return acknowledgement of the firm
• List of creditors with their consent to the conversion
• Approvals from any authority or regulator that licensed the firm, where required
• Incorporation document and statement under section 11 (filed through FiLLiP)

Fees

Form 17 attracts a filing fee under Annexure A of the LLP Rules, in addition to the FiLLiP incorporation fee that depends on the contribution of the new LLP. Stamp duty on the LLP agreement and on any transfer of immovable property is a state matter and should be checked before conversion, because some states treat vesting of property on conversion as a transfer for stamp duty purposes.

What happens on conversion?

When the Registrar registers the LLP, all tangible and intangible property, assets, interests, rights, privileges, liabilities and obligations of the firm vest in the LLP. Pending legal proceedings, contracts, agreements and employment continue with the LLP, and the firm is deemed dissolved. Partners of the old firm remain personally liable, jointly and severally with the LLP, for liabilities incurred by the firm before conversion. Conversion does not wipe out past exposure.

Post-conversion compliances

Within 15 days of registration, the LLP must inform the Registrar of Firms where the firm was registered about the conversion. For 12 months, starting no later than 14 days after registration, the LLP's official correspondence must state that it was converted from the firm and give the firm's name and registration number.

Not notifying the Registrar of Firms can attract a fine of ₹10,000 to ₹1 lakh, plus a daily amount for continuing default. The LLP must also file Form 3 with its agreement within 30 days, obtain a new PAN and TAN, apply for fresh GST registration, and update bank accounts and licences.

Common mistakes

Common errors include omitting a partner who later objects, not obtaining creditor consent, a CA statement of assets and liabilities that does not match the firm's books, and assuming licences automatically continue. Some regulators require fresh registration or prior approval.

Also check the income-tax position. Conversion of a firm into an LLP is not one of the specifically exempt transfers in the way company-to-LLP conversion is, so capital gains and carry-forward of losses should be examined with a tax adviser before filing.

Step by step

1. 1Partners agree

   All partners consent to conversion and agree the LLP agreement terms.

2. 2Get creditor consent

   Obtain written consent from creditors and any required regulatory approvals.

3. 3Prepare CA statement

   A practising CA certifies the firm's assets and liabilities.

4. 4Reserve name and file FiLLiP

   Fill FiLLiP with the proposed LLP details and link Form 17.

5. 5Receive certificate

   The Registrar registers the LLP and the firm stands dissolved.

6. 6Notify Registrar of Firms

   Inform the Registrar of Firms within 15 days of registration.

7. 7Complete follow-ups

   File Form 3, obtain PAN, TAN and GST, and update records.