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Financial Accounting · Accounting of Limited Liability Partnership

Conversion, Winding Up and Disclosures of LLP

Updated 10 October 2026 · Fact-checked

Conversion turns a firm, private company or unlisted public company into an LLP through the Second, Third or Fourth Schedule. On the registration date, all assets and liabilities vest in the LLP and the old entity is dissolved. An LLP closes by winding up and dissolution, or by Registrar strike off. Annual return is due within sixty days of year end.

Understand Conversion, Winding Up and Disclosures of LLP

An LLP can be formed from scratch, but many LLPs start as an existing business. The LLP Act, 2008 lets three kinds of entity convert: a firm (section 55, Second Schedule), a private company (section 56, Third Schedule) and an unlisted public company (section 57, Fourth Schedule). A listed company cannot use this route.

The Registrar must be satisfied that the Schedule has been complied with. Then he registers the documents and issues a certificate of registration naming the date from which the LLP is registered (section 58(1)). Within fifteen days of that date, the LLP must inform the Registrar of Firms or Registrar of Companies, where the old entity was registered, about the conversion.

The effect of conversion is automatic. From the date in the certificate, the LLP exists under the name in the certificate. All tangible and intangible property, assets, rights, liabilities and obligations, and the whole undertaking of the old entity, vest in the LLP without further assurance, act or deed. The old firm or company is deemed dissolved and removed from the records (section 58(4)). So there is no sale and no purchase consideration as in a firm-to-company conversion. In accounts, the old partners' capital or shareholders' funds become the partners' contributions in the LLP.

An LLP ends by winding up, which may be voluntary or by the Tribunal, and it may then be dissolved (section 63). The Central Government makes the rules for the procedure (section 65). Separately, the Registrar can strike off a defunct LLP if he has reasonable cause to believe it is not carrying on business or operation, but only after giving it a reasonable opportunity of being heard (section 75).

While it exists, an LLP must comply with disclosure rules. It files an annual return (commonly called Form 11) within sixty days of closing its financial year (section 35(1)). It also files a Statement of Account and Solvency (commonly Form 8) in the prescribed form and time. Late filing attracts an additional fee (section 69) and, for the annual return, a daily penalty (section 35(2)).

Key rules to remember

Who can convert
Firm → s.55 + Second Schedule; Private company → s.56 + Third Schedule; Unlisted public company → s.57 + Fourth Schedule
Match the entity to the Schedule. Listed companies are not covered.
Intimation after conversion
Inform Registrar of Firms / Registrar of Companies within 15 days of date of registration
Proviso to section 58(1). The LLP gives this intimation.
Effect of conversion (section 58(4))
LLP exists by new name; all property, assets, liabilities vest in LLP; old firm/company deemed dissolved
Vesting is without further assurance, act or deed.
Opening entry in LLP books (at book values)
Dr Assets (each) ; Cr Liabilities (each) ; Cr Partners' Contribution (each partner) ; Contribution = Assets − Liabilities
Use book values unless the question gives revalued figures. Balance of net assets equals total contributions.
Annual return due date
Within 60 days of closure of financial year
For a year ending 31 March, the due date is 30 May. Section 35(1).
Annual return penalty
₹100 per day of default; maximum ₹1,00,000 for the LLP and ₹50,000 for designated partners
Section 35(2). It applies to the LLP and its designated partners.
Modes of closure
Winding up (voluntary or by Tribunal) → dissolution (s.63); Registrar strike off after hearing (s.75)
Rules for winding up are made by the Central Government (s.65).
Misuse of LLP name
Fine of ₹50,000 to ₹5,00,000
Section 20: carrying on business with 'LLP' or 'Limited Liability Partnership' as last words without being incorporated as an LLP.

How to solve Conversion, Winding Up and Disclosures of LLP questions

Use this order for any theory or numerical question on conversion, closure or compliance.

  1. 1Identify the entity converting: firm, private company or unlisted public company. Name the section and Schedule (55/Second, 56/Third, 57/Fourth).
  2. 2State the procedure: documents under the Schedule, Registrar's satisfaction, certificate of registration, and the 15-day intimation to the old Registrar.
  3. 3State the effect under section 58(4): new LLP name, vesting of all property and liabilities, and deemed dissolution of the old entity.
  4. 4For a numerical, list the old entity's assets and liabilities at the values given. Compute net assets, which equals the total partners' contribution.
  5. 5Pass the opening entry in the LLP's books: debit each asset, credit each liability, credit each partner's contribution. Check that debits equal credits.
  6. 6For closure questions, say whether it is winding up (voluntary or by Tribunal) or strike off, and state the condition: reasonable cause and a hearing for strike off.
  7. 7For compliance questions, give the form, the due date counted from the financial year end, and the penalty or additional fee. Show the day count.
  8. 8End with a one-line conclusion that answers the exact question.

Quickest way: Three-line recall: Schedule, Vesting, Filing

When to use it: Use it for MCQs and for the first paragraph of a descriptive answer when time is short.

  1. Schedule: firm = Second, private company = Third, unlisted public company = Fourth. Sections 55, 56, 57 in the same order.
  2. Vesting: on the certificate date all assets and liabilities pass to the LLP automatically and the old entity is dissolved. Intimation to the old Registrar within 15 days.
  3. Filing: annual return within 60 days of year end, ₹100 per day penalty with the stated caps. Strike off needs a hearing. For numbers, contribution = assets − liabilities.

Common mistakes in Conversion, Winding Up and Disclosures of LLP

  • Treating conversion as a sale with purchase consideration and goodwill

    Students carry over the firm-to-company conversion method.

    Fix: Under section 58(4) the assets and liabilities vest in the LLP by law. Record them at the values given and credit partners with their contributions. Do not create purchase consideration unless the question asks for revaluation.

  • Choosing the wrong Schedule or section

    The three sections are similar and numbers are confused.

    Fix: Remember the order: 55 firm, 56 private company, 57 unlisted public company, with Second, Third and Fourth Schedules.

  • Saying a listed public company can convert

    Students read 'public company' and stop.

    Fix: Section 57 covers only an unlisted public company.

  • Counting the annual return due date from the date of incorporation or from AGM

    Confusion with company law annual returns.

    Fix: For an LLP the period is sixty days from the closure of its financial year. For 31 March year end, the date is 30 May.

  • Applying the penalty cap wrongly or ignoring it

    Students multiply ₹100 by days without checking maximums.

    Fix: Compute days × ₹100, then compare with ₹1,00,000 for the LLP and ₹50,000 for designated partners and take the lower figure.

  • Striking off an LLP without a hearing, or confusing it with winding up

    Both words sound like closing the business.

    Fix: Strike off is a Registrar action for a defunct LLP and needs a reasonable opportunity of being heard (section 75). Winding up is voluntary or by Tribunal (section 63).

Worked examples

Example 1

Rohan and Meera are partners of RM Traders (capitals ₹7,00,000 and ₹5,00,000). Assets: land ₹10,00,000, stock ₹4,00,000, debtors ₹3,00,000, cash ₹1,00,000. Liabilities: creditors ₹2,00,000, bank loan ₹4,00,000. The firm converts into RM Traders LLP. Pass the opening entry in the LLP's books at book values and state the legal effect.

Show the solution
  1. Total assets = 10,00,000 + 4,00,000 + 3,00,000 + 1,00,000 = ₹18,00,000.
  2. Total liabilities = 2,00,000 + 4,00,000 = ₹6,00,000.
  3. Net assets = 18,00,000 − 6,00,000 = ₹12,00,000. This equals the capitals 7,00,000 + 5,00,000, so contributions are ₹7,00,000 and ₹5,00,000.
  4. Entry: Land Dr ₹10,00,000; Stock Dr ₹4,00,000; Debtors Dr ₹3,00,000; Cash Dr ₹1,00,000; To Creditors ₹2,00,000; To Bank Loan ₹4,00,000; To Rohan's Contribution ₹7,00,000; To Meera's Contribution ₹5,00,000. Debits ₹18,00,000 equal credits ₹18,00,000.
  5. Legal effect: under the Second Schedule and section 58(4), the assets and liabilities vest in the LLP without further assurance, act or deed, and the firm is deemed dissolved and removed from the Registrar of Firms' records. The LLP must inform the Registrar of Firms within 15 days of the registration date.

Answer: Total contributions are ₹12,00,000 (Rohan ₹7,00,000 and Meera ₹5,00,000). The entry debits the four assets for ₹18,00,000 and credits the liabilities for ₹6,00,000 and the contributions for ₹12,00,000.

Example 2

Aarav Solutions LLP has a financial year ending 31 March 2027. It filed its annual return 51 days after the due date. Find the due date and the penalty under section 35(2) for the LLP and for its designated partners. Then find the penalty if the delay had been 700 days.

Show the solution
  1. Due date: sixty days from 31 March 2027. April has 30 days and May adds 30 more, so the due date is 30 May 2027.
  2. Penalty for 51 days = 51 × ₹100 = ₹5,100. This is below both caps, so the LLP is liable for ₹5,100 and the designated partners are liable for ₹5,100.
  3. For 700 days: 700 × ₹100 = ₹70,000.
  4. LLP cap is ₹1,00,000, so the LLP penalty is ₹70,000. Designated partners' cap is ₹50,000, so their penalty is limited to ₹50,000.
  5. Besides the penalty, the return can be filed late only on payment of the prescribed additional fee under section 69, without prejudice to other action under the Act.

Answer: Due date is 30 May 2027. For 51 days the penalty is ₹5,100 for the LLP and ₹5,100 for the designated partners. For 700 days it is ₹70,000 for the LLP and ₹50,000 (capped) for the designated partners. An additional fee under section 69 is also payable.

Exam tips

  • In theory answers, write the section and Schedule together: for example 'section 55 read with the Second Schedule'. Quote section 58(4) effects in three points: new LLP, vesting, deemed dissolution.
  • For conversion numericals, first check that assets − liabilities equals total capitals. If the question gives revaluation, adjust asset values and credit the gain to partners in their profit-sharing ratio before writing contributions.
  • Show the day count for the annual return date and for penalty. Always compare with the caps before stating the final figure.
  • In MCQs, watch for traps: listed company, 'assessment of consideration', 'without hearing' for strike off, and wrong Schedule names.
  • Write short headed answers: Procedure, Effect, Accounting entry, Compliance. This earns step marks even if the number is slightly off.

Practice questions from Accounting of Limited Liability Partnership

Conversion, Winding Up and Disclosures of LLP in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Conversion, Winding Up and Disclosures of LLP: frequently asked questions

What is the due date for the LLP annual return (Form 11)?

The annual return must be filed within sixty days of closure of the financial year (section 35(1)). For a year ending 31 March, that is 30 May. Late filing attracts ₹100 per day, subject to caps, plus additional fee.

How is a partnership firm converted into an LLP?

The firm complies with the Second Schedule and the Registrar registers the documents and issues a certificate of registration (sections 55 and 58). From the date in the certificate the firm's assets and liabilities vest in the LLP and the firm is deemed dissolved. The LLP then informs the Registrar of Firms within fifteen days.

How can an LLP be closed?

An LLP can be wound up, either voluntarily or by the Tribunal, and then dissolved (section 63). Alternatively, the Registrar may strike off a defunct LLP after giving it a reasonable opportunity of being heard (section 75). The procedure for winding up is set by rules (section 65).

Do I need a purchase consideration entry when a firm converts into an LLP?

No. Assets and liabilities vest in the LLP by law, so you record them in the LLP's books and credit partners' contributions. Use book values unless the question gives revalued figures.