Short Answer
A partnership firm — registered or unregistered — can be converted into a Limited Liability Partnership (LLP). The governing provision is Section 55 of the Limited Liability Partnership Act, 2008, which permits a firm to convert "in accordance with the provisions of this Chapter and the Second Schedule". (LLP Act, 2008, Section 55) [1]
The conversion itself is worked out through the Second Schedule of the LLP Act, 2008, which sets out the conditions, the documents to be filed, and the effect of registration. (LLP Act, 2008, Second Schedule) [2]
Why the Applicable Law Is Section 55, Not Any Other Section
Only Section 55 deals with a firm converting into an LLP. The neighbouring conversion sections cover different entities: (LLP Act, 2008, Sections 55, 56, 57 and 58) [3]
- Section 55 — conversion from a firm into an LLP (this article)
- Section 56 — conversion from a private company into an LLP
- Section 57 — conversion from an unlisted public company into an LLP
- Section 58 — registration and effect of conversion (LLP Act, 2008, Sections 55, 56, 57 and 58) [4]
Sections 24 and 25 are frequently confused with conversion. They are not conversion provisions: Section 24 is "Cessation of partnership interest" and Section 25 is "Registration of changes in partners". (LLP Act, 2008, Section 24; Section 25) [5]
Eligibility — Who Can Convert
A firm is eligible to convert only if all the partners of the firm, and no one else, become partners of the LLP. (LLP Act, 2008, Second Schedule, paragraph 3) [6]
Every LLP must have at least two partners and at least two designated partners who are individuals, with at least one designated partner resident in India. (LLP Act, 2008, Section 6; Section 7) [7]
The fee for the conversion application is set by Annexure 'A' to the LLP Rules, 2009 and is charged per the rules in force; check the MCA portal before filing. (LLP Rules, 2009, Rule 38(1); Second Schedule) [8]
What the Conversion Actually Transfers
Under paragraph 1 of the Second Schedule, "convert" means a transfer of the property, assets, interests, rights, privileges, liabilities, obligations and the undertaking of the firm to the LLP. (LLP Act, 2008, Second Schedule, paragraph 1) [9]
On and from the date of registration, all tangible and intangible property vested in the firm, and all assets, interests, rights, privileges, liabilities, obligations and the whole of the undertaking, vest in the LLP without further assurance, act or deed; and the firm is deemed to be dissolved. (LLP Act, 2008, Second Schedule, paragraph 7) [10]
Documents to Be Filed
Paragraph 4 of the Second Schedule requires the firm to file with the Registrar a statement by all partners (with the name and registration number of the firm, and the date of its registration, if applicable) together with the incorporation document and statement referred to in Section 11. (LLP Act, 2008, Second Schedule, paragraph 4) [11]
The incorporation document is subscribed by two or more persons associated for carrying on a lawful business with a view to profit. (LLP Act, 2008, Section 11) [12]
The conversion application itself is made in the prescribed forms — Form 17 (name reservation) and Form 18 (application for conversion of a firm into an LLP). (LLP Rules, 2009, Form 17; Form 18) [13]
Form 17 is a Part A application under Rule 38(1) of the LLP Rules, 2009, and Form 18 is a Part B statement of partners under Rule 39(1); the fee for each is charged per Annexure 'A'. (LLP Rules, 2009, Rule 38(1); Second Schedule; Rule 39(1); Third Schedule) [14]
Registration and Effect of Conversion
On receiving the documents under paragraph 4, the Registrar registers them and issues a certificate of registration; the LLP is registered on and from the date specified in that certificate. (LLP Act, 2008, Second Schedule, paragraph 5) [15]
Section 58 deals with registration and effect of conversion where the Registrar is satisfied that the firm has complied with the Second Schedule. (LLP Act, 2008, Section 58) [16]
The Registrar may refuse to register if not satisfied with the particulars or information furnished, and an appeal lies to the Tribunal. (LLP Act, 2008, Second Schedule, paragraph 6) [17]
After registration, an LLP by its name is capable of suing and being sued, acquiring and disposing of property, having a common seal, and doing such other acts as bodies corporate may lawfully do. (LLP Act, 2008, Section 14) [18]
Pending Proceedings, Orders and Existing Contracts
All proceedings by or against the firm pending on the date of registration may be continued, completed and enforced by or against the LLP. (LLP Act, 2008, Second Schedule, paragraph 9) [19]
Any conviction, ruling, order or judgment in favour of or against the firm may be enforced by or against the LLP. (LLP Act, 2008, Second Schedule, paragraph 10) [20]
Every agreement to which the firm was a party immediately before registration takes effect as if the LLP were a party instead of the firm. (LLP Act, 2008, Second Schedule, paragraph 11) [21]
Step-by-Step Outline
- Confirm every partner of the firm will be a partner of the LLP (Second Schedule, paragraph 3, LLP Act, 2008). [29]
- Reserve the proposed LLP name in Form 17. [30]
- File Form 18 with the statement by all partners and the incorporation document under Section 11 (LLP Act, 2008). [31]
- The Registrar registers the conversion and issues the certificate under paragraph 5 (LLP Act, 2008, Second Schedule). [32]
- File the LLP agreement in Form 3 — for the purposes of Section 23 of the LLP Act, 2008, the LLP files information with regard to the LLP agreement in Form 3 within thirty days. [33]
- If the firm was earlier registered under the Indian Partnership Act, 1932, the LLP must, within fifteen days of registration, inform the concerned Registrar of Firms of the conversion (LLP Act, 2008, Second Schedule, paragraph 5, proviso). [34]
Whether a fresh PAN or GST registration is required after conversion is set by the Income-tax and GST authorities; check with those authorities before filing.
Post-Conversion Compliance
An LLP must maintain books of account, other records, and comply with audit requirements as prescribed. (LLP Act, 2008, Section 34) [22]
An LLP must file an annual return as prescribed. (LLP Act, 2008, Section 35) [23]
The annual return (Form 11) is due 30 May and the Statement of Account & Solvency (Form 8) is due 30 October each year. (LLP Rules, 2009, Rule 25(1); Rule 24) [24]
FAQ
Q1: Can an unregistered partnership firm convert into an LLP?
Yes. Section 55 permits a firm to convert; "firm" is defined in the Second Schedule as a firm as defined in Section 4 of the Indian Partnership Act, 1932, and that definition is not limited to registered firms. (LLP Act, 2008, Section 55; Second Schedule, paragraph 1) [25]
Q2: Do all partners have to join the LLP?
Yes. Paragraph 3 of the Second Schedule permits conversion "if and only if" the partners of the LLP comprise all the partners of the firm and no one else. (LLP Act, 2008, Second Schedule, paragraph 3) [26]
Q3: Is a separate conveyance deed needed to transfer the firm's assets to the LLP?
No separate assurance, act or deed is required for the vesting — paragraph 7 provides that the property, assets and undertaking vest in the LLP without further assurance, act or deed. (LLP Act, 2008, Second Schedule, paragraph 7) [27]
Q4: What happens if the Registrar refuses to register the conversion?
The Registrar may refuse if not satisfied with the particulars or information furnished; an appeal may be made before the Tribunal. (LLP Act, 2008, Second Schedule, paragraph 6) [28]
Q5: Is stamp duty payable on the conversion?
The LLP Act, 2008 does not prescribe stamp duty for the vesting under paragraph 7; stamp duty, if any, arises under the relevant State stamp legislation, which is not part of this repository.
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Internal links: See makeitlegit.in/start for entity selection guidance, and makeitlegit.in/tools/company-type-comparison for a side-by-side comparison of entity types.
Primary source: LLP Act, 2008 and LLP Rules, 2009 — conversion from a firm into an LLP (Section 55 and the Second Schedule).
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Sources
- LLP Act, 2008, Section 55 — Conversion from firm into limited liability partnership
- LLP Act, 2008, Second Schedule — Conversion from firm into limited liability partnership
- LLP Act, 2008, Sections 55, 56, 57 and 58 — Conversion into limited liability partnership
- LLP Act, 2008, Sections 55, 56, 57 and 58 — Conversion into limited liability partnership
- LLP Act, 2008, Section 24 — Cessation of partnership interest; Section 25 — Registration of changes in partners
- LLP Act, 2008, Second Schedule, paragraph 3 — Eligibility for conversion
- LLP Act, 2008, Section 6 — Minimum number of partners; Section 7 — Designated partners
- LLP Rules, 2009, Rule 38(1); Second Schedule
- LLP Act, 2008, Second Schedule, paragraph 1 — Interpretation
- LLP Act, 2008, Second Schedule, paragraph 7 — Effect of registration
- LLP Act, 2008, Second Schedule, paragraph 4 — Statements to be filed
- LLP Act, 2008, Section 11 — Incorporation document
- LLP Rules, 2009, Form 17 — Reservation of name; Form 18 — Application for conversion of firm into an LLP
- LLP Rules, 2009, Rule 38(1); Second Schedule; Rule 39(1); Third Schedule
- LLP Act, 2008, Second Schedule, paragraph 5 — Registration of conversion
- LLP Act, 2008, Section 58 — Registration and effect of conversion
- LLP Act, 2008, Second Schedule, paragraph 6 — Registrar may refuse to register
- LLP Act, 2008, Section 14 — Effect of registration
- LLP Act, 2008, Second Schedule, paragraph 9 — Pending proceedings
- LLP Act, 2008, Second Schedule, paragraph 10 — Continuance of conviction, ruling, order or judgment
- LLP Act, 2008, Second Schedule, paragraph 11 — Existing agreements
- LLP Act, 2008, Section 34 — Maintenance of books of account, other records and audit, etc.
- LLP Act, 2008, Section 35 — Annual return
- LLP Rules, 2009, Rule 25(1); Rule 24
- LLP Act, 2008, Section 55; Second Schedule, paragraph 1 — Interpretation
- LLP Act, 2008, Second Schedule, paragraph 3 — Eligibility for conversion
- LLP Act, 2008, Second Schedule, paragraph 7 — Effect of registration
- LLP Act, 2008, Second Schedule, paragraph 6 — Registrar may refuse to register
- LLP Act, 2008, Second Schedule, paragraph 3 — Eligibility for conversion
- LLP Rules, 2009, Form 17 — Reservation of name
- LLP Rules, 2009, Form 18; LLP Act, 2008, Section 11 — Incorporation document
- LLP Act, 2008, Second Schedule, paragraph 5 — Registration of conversion
- LLP Rules, 2009, Form 3 — Filing of information with regard to the LLP agreement; LLP Act, 2008, Section 23 — Relationship of partners
- LLP Act, 2008, Second Schedule, paragraph 5 — proviso on informing the Registrar of Firms
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See Also
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