Converting a Proprietorship Firm into LLP

Converting a Proprietorship Firm into LLP

Becoming a corporate; private or public company has turned into the need of the times with globalization. Imagining growth on a large scale is not imaginable for a small organization like a partnership firm.

Some key advantages include

Corporations have a limited liability to the extent of assets of the company in case of losses; partnership firms carry the risk of attachment of the personal assets of the partners in case of debt and losses.

Private and public companies enjoy the advantage of perpetual succession; shareholders may invest or remove shares, directors may come and go, and ownership may change hands, but the existence of the company is not affected. Partnerships do not enjoy this advantage.

Corporations can easily transfer shares and ownership; not easily accomplished by partnership firms.

All the assets, both movable and immovable properties and liabilities of the partnership pass to the company on conversion; this involves no instrument of transfer and eliminates the need to pay stamp duty and capital gains tax on transfer of property.

The accumulated loss and unabsorbed depression of the partnership pass on as the previous year's loss of the successor company; this loss can be carried on and set off for 8 succeeding years.

The partnership firm's brand image and goodwill remains intact and passes on to the company, helping bring better legal recognition to the company.