Question 1

How is a private limited company converted to an LLP?

Accepted Answer

Section 56 of the LLP Act 2008 read with Rule 39 of LLP Rules 2009: the company must have no security interest outstanding over its assets. File Form 18 (statement of company) and Form 2 (incorporation form) simultaneously with ROC. On approval, the Registrar issues an LLP incorporation certificate — the company is automatically dissolved. Timeline: 4–8 weeks.

Question 2

What are the tax consequences of converting a Pvt Ltd to an LLP?

Accepted Answer

Section 47(xiiib) exempts the transfer from capital gains tax if: (a) all assets and liabilities of the company transfer to the LLP; (b) the shareholders' capital contribution and profit sharing ratio in the LLP is same as their shareholding; (c) the shareholder does not receive any consideration other than the LLP interest; and (d) the company's total sales or gross receipts do not exceed ₹60 lakh in any of the 3 preceding years. Accumulated losses carry forward under Section 72A conditions.

Question 3

Can a partnership firm convert to a private limited company?

Accepted Answer

Yes — under Part I of the Companies Act 2013 read with Rule 3 of the Companies (Registration of Foreign Companies) Rules 2014, a partnership can be converted using Form URC-1. The conversion is treated as a slump sale if no specific tax exemption applies. To claim exemption under Section 47(xiii), all partners must become shareholders in the same ratio, no consideration is received, and the firm's business is not discontinued for 5 years.

Question 4

How is an OPC converted to a private limited company?

Accepted Answer

Form INC-6 under Rule 6(4) of Companies (Incorporation) Rules 2014 is filed when paid-up capital exceeds ₹50 lakh or turnover exceeds ₹2 crore. On voluntary conversion before these thresholds, no minimum holding period applies after Finance Act 2021 removed the earlier 2-year restriction. The process requires amended Memorandum and Articles and addition of at least one more member and director.

Question 5

What is a Section 8 company conversion and why is it relevant?

Accepted Answer

A Section 8 company (not-for-profit) can convert to a regular company only by NCLT special order under Section 8(6) — no automatic conversion mechanism. The NCLT order requires a 3/4 majority of members and compliance with conditions including refund of tax benefits received. This conversion is rare and typically triggered by a change in the company's business purpose or a merger.

Company Conversion

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