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Convert partnership to LLP
Limited Liability Partnerships have an whip hand over the overall partnership structure because it is far more beneficial for the partners involved. LLP may be a separate legal entity with compulsory registration with the central government, which isn’t the case with the partnership. it’s a business structure that integrates the benefits of the company’s corporate structure and therefore the flexibility of the partnership, i.e. for organizing their internal composition and operation as a partnership. Therefore conversion of partnership firm into LLP may be a good business decision to secure the partners’ rights and limit their liabilities.
Benefits of partnership to LLP conversion
- Limited Liability of Owners: The liability of Partners is restricted to an extent of capital contribution as agreed by the partners within the LLP Agreement. The loss or debt of LLP can’t be assigned to partners even at liquidation. Further, one partner isn’t held liable for the actions of negligence or misconduct of the other partner.
- Separate legal entity: The partnership isn’t a separate legal entity. just in case if the partner(s) dies or retires or in the other case has got to leave the firm, the partnership ceases to exist. during this case, a replacement partnership has got to be formed; but this is often not the case with an indebtedness partnership. indebtedness partnership may be a separate legal entity.
- Tax benefits: LLP saves the Dividend Distribution Tax, Minimum Alternative Tax, and tax because interest and remuneration are paid to partners as a salary that’s payable to directors.
- Raising Capital: Raising Capital is simpler within the LLP structure because it allows a limited partner to participate without taking over any accountability, unlike the overall partnership where all common partners have unrestrained liability.