A genuine conversion, not a new entity with a transfer
Because the LLP Act's Third Schedule specifically governs this conversion, it works differently from a proprietorship becoming a company. Every asset, liability, right and obligation of the firm vests in the LLP automatically on the date of conversion — there's no need for a separate conveyance, transfer deed, or sale agreement for each asset, and generally no stamp duty on the vesting itself, since it's a statutory vesting rather than a transfer between two parties.
This is also why the partner composition rule is strict: every partner of the firm must become a partner of the LLP, and the LLP cannot include anyone who wasn't already a partner of the firm at conversion. The intention is continuity of the same business under the same ownership, in a different legal wrapper — not an opportunity to simultaneously bring in a new partner or restructure ownership.
Documents required
- The partnership deed and its registration certificate, if the firm is registered.
- Statement of assets and liabilities of the firm, certified by a Chartered Accountant, not older than the prescribed period.
- Consent of all partners to the conversion.
- Income tax returns of the firm for the relevant preceding period.
- No-objection certificate from any secured creditors, where the firm has borrowings.
- The LLP agreement for the converted entity, to be filed alongside incorporation.
The conversion process, step by step
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Confirming partner consensus
Since every existing partner must become a partner of the LLP and no one else may be added at conversion, consent from all partners is confirmed before proceeding.
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Preparing the statement of assets and liabilities
A certified statement of the firm's financial position is prepared, supporting the conversion application.
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Reserving the LLP name and filing Form 17
The LLP's proposed name is reserved, and Form 17 is filed alongside the LLP incorporation documents, referencing the firm's existing registration.
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Incorporation and vesting
Once approved, the LLP is incorporated, and the firm's assets and liabilities vest in it automatically from the date specified in the certificate of registration.
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Public notice and downstream updates
The LLP states its conversion from the firm on its documents for the following 12 months, and registrations such as GST, bank accounts and licences are updated to the new LLP.
Practical notes from our engagements
- A partner wanting to exit at the point of conversion. Since every existing partner must become a partner of the LLP, a partner who wants to leave needs to exit the firm before conversion, or join the LLP and exit shortly after — the conversion itself can't simultaneously drop a partner.
- Secured creditor consent overlooked. Where the firm has borrowings secured against its assets, lender consent or at least notification is worth confirming before conversion, since the assets are vesting in a new legal entity.
- Tax treatment assumed to be automatically neutral. Because the conversion is structured as a statutory vesting with the same partners continuing in the same interests, it's generally approached as tax-neutral in practice — but this depends on the specific facts (asset revaluation, profit-sharing changes, and similar), and is worth confirming for your situation rather than assumed as a blanket rule.
- The 12-month public notice requirement forgotten. Invoices, letterheads and other business documents need to carry the "converted from" statement for a full year after conversion — this is a real, ongoing requirement, not a one-time filing.
How we handle partnership-to-LLP conversion
We confirm partner consensus and address any partner wanting to exit before, rather than during, the conversion, and prepare the certified statement of assets and liabilities the application depends on. We also flag the 12-month public notice requirement so it's built into how the LLP's documents are prepared from day one, not discovered as an oversight later.
Related services
Frequently asked questions
Can some partners of the firm choose not to join the LLP?
No — every partner of the firm at the time of conversion must become a partner of the LLP. Anyone wanting to exit needs to do so from the firm before conversion, not opt out of the LLP while others convert.
Can a new partner join at the same time as the conversion?
No — the LLP at conversion can only include the firm's existing partners. A new partner can be admitted afterward, once the LLP itself is established.
Do the firm's assets need to be individually transferred to the LLP?
No — under the Third Schedule of the LLP Act, all assets, liabilities and obligations vest in the LLP automatically by operation of law, without a separate transfer deed for each asset.
Is stamp duty payable on the assets vesting in the LLP?
Generally not on the vesting itself, since it's a statutory vesting rather than a transfer or sale between two parties — though this is worth confirming for the specific assets involved, particularly immovable property.
Is the conversion tax-neutral?
It's generally approached as tax-neutral where the same partners continue in the same interests, but the specific tax position depends on the facts of the conversion and is worth confirming rather than assumed automatically.
Does our firm need to be a registered partnership before it can convert to an LLP?
Yes, generally the firm needs to be registered under the Indian Partnership Act for this specific conversion route under the Third Schedule.
What happens to the firm's existing contracts and registrations after conversion?
Contracts generally continue with the LLP as successor given the statutory vesting, though registrations like GST and licences typically need formal updating to reflect the new LLP.