This document discusses the pros and cons of converting a company into a Limited Liability Partnership (LLP) under Indian law. Some key benefits of conversion include exemption from dividend and capital gains tax, lower tax rates, and more flexibility in business structure. However, conversion also comes with some disadvantages such as restrictions on interest payments and carry forward of losses, as well as increased compliance requirements. The document provides a detailed analysis of the various tax and business implications of converting a private company to an LLP.

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Conversion of Companies into LLP

2. About LLP:
LLP, a legal form available world-wide, now introduced in
India and is governed by the Limited Liability Partnership
Act 2008, with effect from April 1, 2009
Limited Liability Partnership (LLP) is a corporate business
vehicle that provides both the benefits of a company and
partnership firm i.e. limited liability and allows its members
the flexibility of organizing their internal structure as a
partnership based on a mutually arrived agreement.
C.A. Vishnu Kr Tulsyan

3. Conversion of Companies into LLP
Pros (Overall)
 Exemption from Dividend taxation and DDT
 Exemption from benefit and perquisite taxation
 Lower rate of taxation
 Deemed Speculation loss not applicable
 Restriction u/s. 79 for c/f of loss inapplicable
 MAT u/s. 115JB not applicable to LLP
 S. 46 as applicable to Liquidation not to apply
 Wealth tax not applicable on LLP
 Assigning realistic values
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4.  No Limit on number of shareholders/partners
 Minimal Compliance Level & Cost effective
model
 Automatic transfer
 No Stamp Duty (but it’s a grey area)
 No Capital Gain Tax
 STCG also exempt
 Continuation of Brand Value
 Carry Forward and Set off Losses and
Unabsorbed Depreciation
 Exemption for partners u/s. 10(2A)
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Conversion of Companies into LLP
Pros (Contd-)
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5. MAT credit not available
Restriction on interest and remuneration
Applicability of s. 78 for c/f losses
Applicability of s. 45(4) on distribution of capital
assets
Wealth tax on partners
Period of holding for partners’ share extended
Applicability of AMT u/s. 115JC
Company specific deduction not available
Lower rate of incentives under chapter VI-A
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Conversion of Companies into LLP
Cons (Overall)
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6. Stringent compliance for exemption
Exposure to withdrawal u/s. 47(4A)
Lapse of some unabsorbed allowances
Unabsorbed losses under non business
heads
Claim for deduction by successor
-s. 801B(12)
No specific exemption u/s 47 for
amalgamation, demerger
No specific exemption provision for
exemption on reconversion
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Conversion of Companies into LLP
Cons (Contd-)
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7. Thank You!
CA Vishnu Kr Tulysan
+91 98310 54180 / vishnu@vktulsyan.com
www.vktulsyan.com/
CA Vishnu Kr Tulsyan is practicing
Chartered Accountant & Company
Secretary with over 15 years of
exhaustive experience in the filed
of Finance, Accounts, Corporate
Compliance & Advisory, Regulatory
Changes Implementation.
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