LLP Destination
Why to Convert - Partnership Firm into LLP Back
LLP is a business structure which offers almost all the advantages of a partnership and at the same time mitigates the disadvantages of the traditional Partnership to a large extent

These exclusive advantages of LLP over partnership coupled with the flexibility of a partnership structure serves as the foundation stone for a LLP.

Conversion of CA Firms into LLPs

In terms of Council decision dated 14th July, 2011, guidelines for Conversion of CA firms into LLPs and constitution of separate LLPs by the practicing Chartered Accountants have been finalized. Therefore now existing CA firms may convert themselves into LLPs and the other members in practice can form new LLPs.

This new amendment will pave the way for a consolidation of so many small CA firms, help them to grow exponentially and expand in scale and operations and have savings in cost by way of infrastructure.

In addition to the above, LLP has many other advantages over the Partnership structure which makes it evident that LLP is a better form of structure from both commercial and administrative angle. As far as tax angle is concerned, LLP is treated as a partnership firm for the Income Tax purposes.

Why LLP is better than Partnership Taxes on Conversion of Partnership into LLP

There is no provision under Income Tax Act to specifically provide that Conversion of a Partnership into LLP does not amount to transfer

However explanatory memorandum to Finance Bill 2009 provides that the conversion from a general partnership firm to an LLP will have no tax implication, if the rights and obligation of the partners remain the same after conversion and if there is no transfer of any asset or liability after conversion. If there is a violation of these conditions, the provision of capital gain will apply.

Therefore in the normal parlance, conversion of a partnership into LLP will have no tax implications as there is no transfer of assets to a third party on conversion of partnership firm to LLP.
Convert your partnership into LLP Obtain expert Advice Request for call Convert your CA firm into LLP