Converting an LLP into a Private Limited Company: The Section 366 Route, Tax Cost and Timeline

Short answer: Yes. An LLP can become a private limited company under section 366 of the Companies Act, 2013, by filing Form URC-1 with SPICe+. Every partner must consent, a newspaper notice runs for 21 days, and the Registrar then issues a fresh Certificate of Incorporation. Done right, the business moves across intact and the conversion attracts no capital gains tax.

Most LLPs start for the right reasons. The structure is light, the compliance is thin, and two partners can run a serious business without board meetings and annual general meetings. Then something changes. An investor asks for shares, and an LLP has none to give. A key hire asks for ESOPs, and there is no share capital to carve them from. Or the accountant runs the numbers and the company’s 22% tax regime starts looking better than the LLP’s 30%. That is when partners start asking about conversion — and the first thing to know is that it is a registration, not a sale. The business does not get sold to a new company. It walks across a legal bridge and keeps everything it owns.

Think of it as moving house without packing a single box. The furniture, the contracts, the debts, the pending cases — all of it moves with you, because the law moves it. Only the nameplate on the door changes, and the old registration is cancelled the same day the new one is issued.

Why founders convert an LLP into a private limited company

The trigger is almost always one of four things. The first is money: a private limited company can issue equity shares, preference shares and convertible instruments to angel investors and venture capitalists, while an LLP cannot issue shares at all. The second is people: share-based ESOPs need share capital, and an LLP has none. The third is tax: an LLP pays 30% plus surcharge and cess, while a company can opt for the 22% regime under section 200 of the Income-tax Act, 2025 (formerly section 115BAA of the 1961 Act), which works out to an effective rate of about 25.17%. The fourth is the long game: a company can convert into a public limited company and list, while an LLP cannot list at all.

None of that makes conversion right for every LLP. If nobody is investing, nobody needs ESOPs and the tax maths does not move, the LLP is cheaper to run and you should leave it alone. Convert because a specific door is closed to you, not because a company sounds more serious.

What is the Section 366 route?

The LLP Act, 2008 has no provision for an LLP to become a company. The route comes from the other side: Part I of Chapter XXI of the Companies Act, 2013 lets certain existing entities register themselves as companies, and section 366 expressly includes a limited liability partnership. The procedure sits in the Companies (Authorised to Register) Rules, 2014. In practice you run two filings at once — the conversion application in Form URC-1, and the ordinary incorporation of the company through SPICe+ (INC-32) with the e-Memorandum (INC-33) and e-Articles (INC-34). The Registrar checks both, and if satisfied issues a fresh Certificate of Incorporation with a new CIN. That is the moment the LLP becomes a company.

One warning before the steps: this is not the same as closing the LLP and starting a company. A fresh incorporation means selling or transferring the business, new contracts, and a capital gains question on every asset. The section 366 route vests everything by law, which is exactly why the tax treatment is different — and why the conditions in the tax section below matter so much.

Can your LLP convert? Seven checks before you start

• At least two partners. A private limited company needs at least two members and at least two directors, so the LLP must have two or more partners on the date of application.
• Every partner agrees, in writing. Conversion needs unanimous consent. There is no majority route — one dissenting partner can stop the whole thing. The partners pass a resolution and authorise a designated partner to handle the filings.
• Filings are current. Form 8 (Statement of Account and Solvency) and Form 11 (Annual Return) must be filed up to the date of application. Filing URC-1 with either outstanding risks rejection — regularise first, then convert. If your LLP has pending compliances, read our guide on closing an LLP with pending compliances first; the regularise-first logic is identical.
• Secured creditors have no objection. Under section 374(a), the LLP needs the consent or no-objection of all secured creditors. If there is no secured debt, a declaration to that effect goes in instead.
• No insolvency or winding-up proceedings pending. An LLP under insolvency resolution or winding up cannot apply.
• Every partner becomes a shareholder. All existing partners must take shares in the new company. This is also one of the conditions for the tax exemption — it is not optional.
• The company side is staffed. At least two directors, including one resident director — someone who stayed in India for at least 182 days during the financial year.

If any of these fails, fix it before spending money on the filing. The consent check is the one that kills most conversions: founders discover a silent partner, or an old partner who left years ago but never formally exited, and the file cannot move until that is resolved. The LLP agreement is where the exit mechanics live — read it before you promise an investor a timeline.

How to convert an LLP into a private limited company, step by step

Step 1: Get every partner’s written consent

Hold a partners’ meeting, pass a unanimous resolution approving the conversion, and record each partner’s written consent. Authorise one designated partner to sign and file. Get the consent in writing from every partner — including anyone who rarely attends meetings. A verbal “fine, go ahead” is worth nothing when the Registrar asks for the paper.

Step 2: Sort out DSCs and DINs

Every proposed director and subscriber needs a Class 3 Digital Signature Certificate to sign forms on the MCA portal. Directors without a Director Identification Number get one through SPICe+ during incorporation. Do this early — DSC issuance is the most common avoidable delay in the whole process.

Step 3: Reserve the company name

Apply through SPICe+ Part A. Most LLPs keep their existing name and simply replace “LLP” with “Private Limited”, subject to the MCA’s name-availability rules. Name reservations are time-limited, so do not reserve the name and then sit on it — complete the URC-1 filing before the reservation lapses.

Step 4: Publish the public notice in Form URC-2

Advertise the proposed registration in one English newspaper and one newspaper in the vernacular language of the district where the LLP’s registered office sits. The notice invites objections within 21 clear days of publication. This is the hard floor of the whole timeline: nothing can be filed until those 21 days have run. Keep copies of both advertisements — they are filed with URC-1, along with proof that the notice was served on the Registrar of LLPs.

Step 5: Prepare the documents pack

URC-1 travels with a thick pack: the partners’ resolution and written consents; a list of partners as on a date not more than six clear days before the application, showing the shares each will hold; the LLP agreement and the LLP’s Certificate of Incorporation; a statement of accounts certified by the auditor, prepared not more than 15 days before the application, plus the previous year’s audited financial statements and the latest income-tax return; NOCs from secured creditors and charge holders where applicable; the proposed directors’ DINs, consents in DIR-2 and the declaration in INC-9; registered-office proof; and the KYC of each director and subscriber. Draft the Memorandum and Articles alongside — the objects clause should reflect the business the LLP already carries on, not a wish list.

Step 6: File Form URC-1 with SPICe+

File URC-1 together with SPICe+ Part B, the e-MoA (INC-33) and e-AoA (INC-34), and AGILE-PRO-S, which registers the new company for EPFO, ESIC and a bank account, plus GST and professional tax where applicable. The filing fee follows the authorised-capital slab. A private company has no minimum paid-up capital requirement, so the authorised capital is your choice — but pick it with the share allotment in the next section in mind, because the capital accounts have to map cleanly onto shares.

Step 7: ROC scrutiny

The Registrar examines the application, verifies the documents and may raise queries. The usual queries are about the partner list, the auditor-certified accounts, or a creditor NOC that reads like a maybe instead of a yes. Answer precisely and fast — a vague reply earns a second query and another week.

Step 8: Certificate of Incorporation — and the LLP is dissolved

Once satisfied, the Registrar issues a fresh Certificate of Incorporation and a new CIN. On registration, the LLP stands dissolved under section 374 — no separate strike-off, no Form 24. Its property vests in the company under section 368, its debts, liabilities and contracts continue against the company under section 369, and pending suits and legal proceedings continue in the company’s name under section 370. If you want the full picture of what a private limited company takes on after incorporation, that is where the company-side compliance begins.

What changes on day one after the Certificate of Incorporation

The business is the same. The paperwork is not. The company gets a fresh PAN and TAN through SPICe+, so the LLP’s PAN stops being used. The LLP’s GSTIN cannot be transferred — the company needs a fresh GST registration within 30 days, and unutilised input tax credit moves across through Form GST ITC-02. Bank accounts need fresh KYC in the company’s name. Licences, registrations and contracts that name the LLP need updating or novation, even though the underlying rights and obligations continue by law. And the company now lives under company law: board meetings, annual filings, statutory registers and the audit thresholds that come with being a private limited company. If you have not priced that ongoing compliance, read what a private limited company costs to set up and run before you convert — the filing fee is the smallest part of the decision.

The tax question: is the conversion tax-free?

This is the question that decides whether the conversion is cheap or ruinous, and the honest answer is conditional, not automatic. Section 70(1)(zd) of the Income-tax Act, 2025 — formerly section 47(xiii) of the 1961 Act — says the transfer of the LLP’s assets to the company is not a “transfer” for capital gains purposes, but only if all four conditions are met:

• All assets and liabilities of the LLP immediately before the conversion become the assets and liabilities of the company.
• All partners become shareholders in the same proportion as their capital accounts stood on the date of conversion.
• The partners receive no consideration or benefit, directly or indirectly, in any form, other than by way of allotment of shares.
• The former partners together hold at least 50% of the company’s total voting power, and keep holding it for five years from the date of conversion.

Here is what that looks like in practice. Three partners hold capital accounts of ₹40 lakh, ₹30 lakh and ₹30 lakh — ₹1 crore in total. On conversion they receive shares worth ₹40 lakh, ₹30 lakh and ₹30 lakh respectively. Same proportions, shares only, nothing in cash. The conversion attracts no capital gains tax, and the company steps into the LLP’s shoes.

Now the breach scenario, which is where founders actually lose money. In year three, two of the partners sell down to an incoming investor, and the former partners’ combined voting power drops to 40%. Condition four is broken. Section 71 — formerly section 47A — withdraws the exemption, and the capital gain that was not taxed at conversion becomes taxable in the company’s hands in the year of the breach. The same logic applies to accumulated losses: the company can carry forward the LLP’s losses and unabsorbed depreciation under section 116(8) (formerly section 72A(6)), subject to the same four conditions, and if a condition is breached, the loss already set off becomes the company’s income in the year of the breach under section 116(9).

Two traps deserve their own warning. First, revaluing assets just before conversion inflates the partners’ capital accounts and can count as a benefit beyond shares — it puts the exemption at risk for no commercial gain. Second, withdrawing capital or settling a partner in cash before the conversion breaks the “shares only” condition. Clean up the capital accounts months before you convert, not days. And because the exemption turns on facts a return preparer cannot see, get a written tax opinion from your CA before relying on it — the opinion costs far less than a reassessment.

Stamp duty is the other cost founders forget. Because the property vests by operation of law under section 368, there is generally no conveyance deed — but state law decides whether duty is payable on immovable property that vests, so check your state’s position before budgeting. If the LLP owns land or a factory building, this is not a footnote.

What does the conversion cost?

There is no single published price, and any guide that quotes one is guessing. The ROC filing fee follows the authorised-capital slab, so it depends on the capital you choose. Professional fees depend on how clean the LLP’s records are — a current Form 8 and Form 11, a signed agreement and a cooperative creditor list cost far less to convert than a firm with three years of gaps. Stamp duty, where a state levies it on vesting property, is the variable that can dwarf the rest. And the real cost is the tax one: if the section 70(1)(zd) conditions fail, the capital gains bill lands on the company. Budget for the filing, the opinion and the duty — not just the filing. If the numbers matter to your decision, run them through the compliance fee calculator alongside your CA’s estimate rather than trusting a headline fee.

How long does the conversion take?

Most practitioners quote 30 to 45 days from the partners’ resolution to the Certificate of Incorporation; some quote 30 to 60 days when creditor NOCs or ROC queries intervene. Treat both as practitioner estimates, not a statutory timeline — the only fixed number in the whole process is the 21-day objection window. An illustrative run looks like this: days 1–2, resolution, DSCs and name reservation; day 3, URC-2 published; days 3–24, the 21-day objection window runs while the documents pack is prepared; day 25, URC-1 and SPICe+ filed; then one to two weeks of ROC scrutiny. The delay almost never sits with the Registrar. It sits with a partner who has not signed, a creditor who has not replied, or accounts that were certified a month ago and have now aged past the 15-day rule.

Five mistakes that cost founders real money

• Filing with Form 8 or Form 11 outstanding. The Registrar can reject URC-1 outright. Regularise first, convert second.
• Assuming a majority is enough. Conversion needs every partner’s written consent. One holdout stops the file — deal with exits and disputes before you start, not during the 21-day notice.
• Revaluing assets or withdrawing capital just before conversion. Both can break the “shares only” condition and cost you the section 70(1)(zd) exemption.
• Paying a partner in cash to leave. Cash consideration is the cleanest way to fail condition three. Settle exits through shares, or settle them well before the conversion.
• Forgetting the day-one admin. Fresh GST registration within 30 days, ITC-02 for the credit, new PAN/TAN on every record, bank KYC, licences updated. The conversion is not finished when the Certificate of Incorporation arrives — it is finished when the last system knows the new name.

Frequently asked questions

Can a single-partner LLP convert into a private limited company?

No. A private limited company needs at least two members and at least two directors, so the LLP must have at least two partners. A single-partner LLP would need to admit a partner first — and that admission itself needs an LLP agreement amendment and a Form 3 filing.

Does the LLP have to file Form 24 after conversion?

No. Section 374 dissolves the LLP automatically on registration as a company. Form 24 is the strike-off route for closing an LLP without converting — a different process for a different decision.

Can we keep the same business name?

Usually, yes. Most conversions keep the LLP’s name and replace “LLP” with “Private Limited”, through SPICe+ Part A, subject to the MCA’s name-availability rules. If another company already holds a confusingly similar name, you will need a variation.

Is the conversion tax-free?

Only if all four conditions in section 70(1)(zd) of the Income-tax Act, 2025 are met — all assets and liabilities pass, partners become shareholders in the same capital-account proportions, no consideration other than shares, and the former partners hold at least 50% of the voting power for five years. If any condition is breached within five years, section 71 withdraws the exemption.

What happens to the LLP’s GST number?

It cannot be transferred. The company takes a fresh GST registration within 30 days of incorporation, and unutilised input tax credit moves across through Form GST ITC-02.

How long does an LLP to private limited conversion take?

Most practitioners quote 30 to 45 days from the partners’ resolution to the Certificate of Incorporation, and some quote up to 60 days when creditor NOCs or ROC queries slow things down. The 21-day URC-2 objection window is the fixed floor — nothing files until it has run.

If an investor is waiting, an ESOP plan is drafted, or the 22% regime changes your tax bill, conversion is the right move — but only after the consent is unanimous, the filings are current and the tax conditions are checked against your actual capital accounts. The LLP served you well; the question is whether the next five years need a company. If they do, start with the partners’ resolution and the Form 8 and Form 11 check, and let the 21-day clock run while your CA confirms the exemption holds.