Converting a partnership firm into an LLP: procedure and effect

Basis. A firm converts into an LLP under Chapter X of the Limited Liability Partnership Act, 2008 (section 55) and the Second Schedule. For this purpose a firm carries the meaning given in section 4 of the Indian Partnership Act, 1932, and to convert means to transfer the firm's property, assets, interests, rights, privileges, liabilities, obligations and undertaking to the LLP in accordance with the Schedule (para 1). A firm may convert by complying with the Schedule's requirements, and once it converts, its partners are bound by the provisions of the Schedule that apply to them (para 2).

Procedure for conversion.

1. Eligibility (para 3). A firm may apply to convert if, and only if, the partners of the proposed LLP are all the partners of the firm and nobody else. No partner can be dropped and no outsider brought in at the moment of conversion.
2. Documents filed with the Registrar (para 4). The firm files:
   • 1. a statement by all its partners, in the form and manner and with the fee the Central Government prescribes, giving (i) the firm's name and its registration number, if any, and (ii) the date on which it was registered under the Indian Partnership Act, 1932 or any other law, if it was; and
   • 2. the incorporation document and the statement referred to in section 11.
3. Registration (para 5). On receiving these documents the Registrar, subject to the Act, registers them and issues a certificate of registration, in a form he decides, stating that the LLP is registered under the Act on and from the date specified in it.
4. Intimation to the Registrar of Firms (para 5, proviso). Within fifteen days of the date of registration, the LLP must inform the Registrar of Firms with which the firm was registered under the Indian Partnership Act, 1932 of the conversion and of the LLP's particulars, in the form and manner the Central Government prescribes.
5. Refusal and verification (para 6). The Schedule does not oblige the Registrar to register the LLP if he is not satisfied with the particulars or other information furnished under the Act; an appeal lies to the Tribunal against a refusal. He may also, in any particular case, require the para 4 documents to be verified in whatever manner he considers fit.

Effect of conversion.

1. The LLP comes into being (para 7(a)). On and from the date of registration stated in the certificate, there is an LLP registered under the Act by the name the certificate specifies.
2. Business vests in the LLP (para 7(b)). All the firm's tangible property, movable and immovable, and its intangible property, all its assets, interests, rights, privileges, liabilities and obligations, and the whole of its undertaking pass to and vest in the LLP without any further assurance, act or deed, so no separate conveyance is needed.
3. The firm ends (para 7(c)). The firm is deemed to be dissolved and, if it had been registered under the Indian Partnership Act, 1932, it is removed from the records kept under that Act.
4. Appointments and powers continue (para 14). An appointment of the firm in any role or capacity that is in force just before registration operates from that date as if the LLP had been appointed, and any authority or power conferred on the firm and in force just before registration operates as if it had been conferred on the LLP.
5. Approvals, permits and licences (para 15). Paragraphs 7 to 14 apply to any approval, permit or licence issued to the firm under any other Act and in force just before registration, subject to the provisions of that other Act.
6. Partners stay liable for the firm's past debts (para 16). Despite paragraphs 7 to 14, every partner of the converted firm remains personally liable, jointly and severally with the LLP, for the firm's liabilities and obligations incurred before the conversion or arising from any contract made before it. A partner who pays such a liability is entitled to be fully indemnified by the LLP, unless he has agreed otherwise with the LLP.
7. Notice of conversion in correspondence (para 17). For twelve months, starting not later than fourteen days after the date of registration, every official correspondence of the LLP must state that it was converted from a firm into an LLP as from the date of registration, and give the name and registration number, if any, of the firm. An LLP that fails to do so is punishable with a fine, and a further fine for each day after the first that the default continues.

Example. Mehta, Rao and Iyer run a registered firm of tax consultants in Jaipur. They may convert only if all three, and no one else, become the LLP's partners. All three sign the para 4 statement giving the firm's name, registration number and date of registration, and file it with the incorporation document and the section 11 statement. When the Registrar issues the certificate, say with effect from 1 July 2025, the firm's office lease, bank balances, client appointments and goodwill vest in Mehta Rao Iyer LLP without fresh transfer deeds; the firm is dissolved; the LLP tells the Registrar of Firms within fifteen days and prints the conversion notice on its letters for twelve months; and a supplier's bill of March 2025 can still be recovered from each of the three partners personally as well as from the LLP.

Conclusion. Conversion is a statutory transfer: a firm whose partners all become the LLP's partners files the Second Schedule documents, and on registration its whole business passes to the LLP and the firm is dissolved, while its partners remain answerable for the firm's earlier debts.