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CS Executive · Setting Up of Business, Industrial and Labour Laws · Conversion of Business Entities

Sharma & Sons, a partnership firm, wants to adopt limited liability status. Which provision of the LLP Act, 2008 enables this?

Section 55 of the LLP Act, 2008 allows a firm to convert into a limited liability partnership in accordance with the provisions of that Chapter and the Second Schedule. The conversion follows the prescribed procedure and is neither automatic nor completed by a mere resolution.

  1. AA firm may convert into a limited liability partnership in accordance with the relevant Chapter and the Second ScheduleCorrect
  2. BA firm may convert only into a company, never into an LLP, under the LLP Act
  3. CA firm becomes an LLP automatically after three years of existence
  4. DA firm may convert into an LLP by passing a resolution, with no other requirements of the Act

Explanation

Section 55 of the LLP Act, 2008 states that a firm may convert into an LLP in accordance with the provisions of the Chapter and the Second Schedule. Conversion is therefore not automatic and not by resolution alone. It follows the prescribed procedure.

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