Conversion of Company (Pvt Ltd ↔ LLP) – Complete Legal & Tax Guide

Business restructuring is a critical strategic decision. One of the most common restructuring options in India is conversion between a Private Limited Company and a Limited Liability Partnership (LLP).

This decision impacts taxation, compliance burden, funding capability and long-term scalability. Therefore, understanding both legal and tax implications is essential before conversion.

1. Legal Framework

• Companies Act, 2013
• LLP Act, 2008
• Income-tax Act (Section 47)

2. Company to LLP Conversion

Eligibility Conditions

Condition	Requirement
Shareholders	Same as partners
No Security Interest	Mandatory
Turnover Limit	₹60 lakh (for tax neutrality)
Asset Limit	₹5 crore

Process

• Board resolution
• DIN/DSC for partners
• File Form 18 & 2
• Certificate of registration

3. LLP to Company Conversion

• Approval from partners
• Name reservation
• Filing SPICe+ forms
• ROC approval

4. Tax Implications

Aspect	Impact
Capital Gains	Exempt if conditions met
MAT Credit	Not allowed
Carry Forward Losses	Allowed (conditions apply)

5. Advantages of LLP

• Lower compliance
• No dividend tax
• Flexible structure

6. Advantages of Company

• Better funding options
• Investor friendly
• ESOP flexibility

Conversion Decision Calculator

Compliance Cost Calculator

Common Mistakes

• Ignoring tax conditions
• Improper documentation
• Not evaluating funding needs

Internal Links

Board Meetings Guide
RPT Guide
Compliance Checklist

Conclusion

Conversion between LLP and Company is a strategic decision with long-term implications. Proper evaluation of tax, compliance and business goals is essential.

Consult a Corporate Compliance Advisor.

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