Conversion of OPC to LLP: A Step-by-Step Guide

The popularity of Limited Liability Partnerships (LLPs) has grown significantly due to their advantageous business model, providing numerous long-term benefits. This innovative structure merges features from partnerships and corporate entities, enabling business owners to capitalize on the advantages offered by LLP. Entrepreneurs often view LLPs as a favorable alternative, providing the flexibility typically associated with partnership agreements. This article will look at the Conversion of OPC to LLP.

Limited Liability Partnership

An LLP, or Limited Liability Partnership, is a business structure that combines the benefits of a partnership with limited liability protection. In an LLP, partners have limited personal liability for the partnership's debts and obligations, keeping their assets safe. LLPs are popular among professionals who want to work together while enjoying this limited liability. IndiaFilings offers reliable LLP registration services in India.

One Person Company

An OPC, or One Person Company, is a unique company structure where a single individual can establish and operate a company as a separate legal entity. In an OPC, only one person acts as the shareholder and the director, providing a simplified structure for individuals to start their businesses.

Conversion of OPC to LLP

The conversion of an OPC (One Person Company) to an LLP (Limited Liability Partnership) can be advantageous for several reasons. Here are the key benefits and considerations of this conversion process:

Limited Liability Protection: By converting to an LLP, the sole member of the OPC can enjoy limited liability protection. This means their assets are safeguarded, and they are not personally liable for the debts and obligations of the LLP.
Flexibility in Management: LLPs offer greater management flexibility than OPCs. Converting allows the addition of more partners, enabling shared responsibilities and expertise. This can lead to improved decision-making and operational efficiency.
Attracting Partners and Investors: Converting to an LLP structure may make the business more appealing to potential partners and investors. LLPs have a recognized and widely accepted legal framework, enhancing credibility and opening doors to collaboration and funding opportunities.
Separate Legal Entity: LLPs have a separate legal existence from their partners. This provides distinct advantages such as ease of contract negotiations, property ownership, and business transactions.
Taxation Benefits: Converting to an LLP can offer potential tax advantages depending on the jurisdiction and specific circumstances. It is advisable to consult with tax professionals to understand the tax implications and benefits of the conversion.

In addition to these advantages, converting an OPC to an LLP also offers other benefits, such as a distinct legal identity, making it easier to raise funds, enter into contracts, and avail opportunities in the name of the LLP. LLPs also have reduced compliance requirements compared to corporations, resulting in reduced administrative burden and cost savings.

Understanding the Legal Provisions for Conversion of OPC to LLP

To convert a One Person Company (OPC) into a Limited Liability Partnership (LLP) in India, specific legal provisions exist to follow. The process involves the Companies Act of 2013 and the Limited Liability Partnership Act of 2008.

Methods through Which a New Company can become an LLP

To convert a new company into an LLP, there are specific methods to follow. The first step is to convene a board meeting, which holds immense importance as the board resolution determines whether the company will change its operational direction. The subsequent step involves obtaining written consent from each shareholder who has voted for the LLP conversion. You must also request name availability through a digital form called 'RUN-LLP' during the ROC filing process.

Eligibility Criteria and Compliance Requirements for Conversion

Specific criteria must be met to be eligible for conversion from a One Person Company (OPC) to a Limited Liability Partnership (LLP) in India. These criteria include:

Two Years of Existence: The OPC must have completed at least two full years before converting it into an LLP.

In addition to meeting the eligibility criteria, several compliance requirements must be fulfilled for a legitimate conversion:

Registrar of Companies (RoC) Filing: The necessary forms and documents must be filed with the Registrar of Companies. This includes the application for conversion and relevant forms such as Form 18, Form 2, and Form 3, as specified by the RoC.
Creditor No-Objection Certificates (NOCs): NOCs must be obtained from the creditors of the OPC. These certificates ensure that the creditors know the conversion and have no objections or claims against it.
Member Consent: The sole member of the OPC must provide written consent for the conversion to an LLP.
Update LLP Agreement: The existing Memorandum of Association (MoA) and Articles of Association (AoA) of the OPC must be revised and replaced with a Limited Liability Partnership Agreement. This agreement outlines the rights, duties, and obligations of the partners within the LLP.

It is essential to comply with the provisions of the Limited Liability Partnership Act of 2008 and the Companies Act of 2013 during the conversion process.

Documents that complement Form 18

The foremost requirement is the shareholders' statement. This document is received from every shareowner who conveys their consent in written format.

The auditor's certification ensures that the stated list of liabilities and assets of the enterprise are correct to the best of his knowledge.
Complete list of the creditors (if any). Their consent is unavoidable before the owners consider an LLP conversion. An acknowledgment copy of the most recent IT return is also required.
Above all these documents, the Registrar of Companies will ask to produce additional documents, such as an auditor's certification that the organization is not involved in NBFC acts. Also, self-declaration has to be generated from the shareholders' end, mentioning that their company is not linked to any secured creditors as of the application filing date.

The RoC now reconciles the application submitted by an OPC to decide whether the LLP proposal can be accepted. Once the authorities pass on approval, please fill in the details through the digital LLP-3 form within one month of conversion approval offered by the RoC.

Procedure for Conversion of OPC to LLP

Here is a consolidated step-by-step guide for the legitimate and legal conversion of a One Person Company (OPC) to a Limited Liability Partnership (LLP) in India:

Obtain NOCs from Creditors: Obtain No Objection Certificates (NOCs) from all creditors associated with the OPC to ensure they have no objections or claims against the conversion.
Seek Member Consent: Obtain written consent from the sole member of the OPC for the conversion to an LLP.
Prepare Documents and Submit to Registrar: Prepare the necessary documents, including the application for conversion and relevant forms, and submit them to the Registrar of Companies (RoC).
Fill out Form 17: Complete Form 17, the application for converting the OPC into an LLP. Submit this form along with the LLP agreement to the RoC.
Check Name Availability and File Forms 2 and 3: File Form 2 to verify the availability of the proposed LLP name. Once the name is approved, submit Form 3 to incorporate the LLP as a company.
File Forms 14 and 18: File Form 14 and 18 to submit the LLP agreement and the statement of conversion, respectively.
Obtain Certificate of Incorporation: After the submitted documents are reviewed and verified, the RoC will issue a Certificate of Incorporation confirming the conversion of the OPC into an LLP.
Revise the LLP Agreement: Make necessary amendments to the LLP agreement to reflect the change in the business structure and comply with LLP requirements.

Following these steps, you can successfully convert your OPC into an LLP in India while adhering to the legal procedures. For a successful conversion of a new company into an LLP, several criteria need to be met: Agreement among executives and members: All company executives and members must agree to the conversion policies and understand they will become partners in the Limited Liability Partnership (LLP). It should be clear that no external parties will be involved in partnership roles. Creditors should also be informed about the conversion plans, and their consent should be obtained. Compliance with legal requirements: The conversion process should adhere to the relevant laws and regulations. The prosecution and implications applicable to the old company should continue to be in effect for the LLP. The Registrar of Companies (RoC) requires filing pending returns and forms and keeping them current. There should be no active unsatisfied charges against the company.