A) Tax Benefits
The most important reason for conversion of a company into an LLP is on the tax front. Currently, the Income-tax Act, 1961, provides for payment of minimum alternate tax (MAT) as also for payment of dividend distribution tax (DDT) by companies. An LLP, which is not a company, should not be liable to pay DDT.
B) No Limit on number of shareholders/partners
Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners.
C) Minimal Compliance Level & Cost effective model
There is no need of compliances related to meetings and maintenance of huge statutory records.
D) Automatic transfer
All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP.
E) No Stamp Duty
All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
F) No Capital Gain Tax
No Capital Gains tax shall be charged on transfer of property from Company to LLP.
G) Continuation of Brand Value
The goodwill of the Company and its brand value is kept intact and continues to enjoy the previous success story with legal recognition.
H) Carry Forward and Set off Losses and Unabsorbed Depreciation
The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.