Edutech Business - Structure Change from Partnership to LLP
The Client
A two-partner education company running online and offline coaching programmes had grown from a small side project to a 55-employee business across Noida and Gurgaon. They were still operating as a partnership firm — which meant both partners were personally and unlimitedly liable for every business debt, every employee claim, and every student refund dispute
The Problem
- Unlimited Personal Liability:
Under the Indian Partnership Act, 1932, partners are personally liable for all business debts. With ₹3 crore revenue, 55 employees, and multiple stakeholders, any major claim could directly impact their personal assets.
- Legal Notice received:
A student sent a legal notice claiming ₹6.5 lakh, addressed to the partners personally — highlighting the risk of having no separate legal entity.
- No POSH Compliance:
Despite 55 employees, there was no Internal Committee or POSH policy, exposing them to penalties under the Sexual Harassment of Women at Workplace Act, 2013.
- Weak Employment Contracts:
Most employees had no proper agreements, creating risks around termination disputes, IP ownership, and confidentiality.
- All Contracts in Partnership Name:
All vendor and client contracts were on the name of partnership, making transition to a new structure complex and risky.
What SPJ Advocates Did?
Structure change from partnership to LLP:
- We filed the LLP incorporation through the MCA portal:
- Reserved the LLP name (same brand name, appended "LLP")
- Obtained DSCs and DPINs for both partners
- Drafted the LLP Agreement — mentioned profit sharing ratio, decision-making authority, capital contributions, admission and exit of partners, and dispute resolution (mediation in Gurgaon, then arbitration)
- Filed Form FiLLiP with the MCA
- Certificate of Incorporation
Asset Transfer from Partnership to LLP:
Drafted the asset transfer agreement moving all assets of the partnership firm — bank accounts, receivables, equipment, intellectual property (course content, brand name, domain names, app code), client lists, and contracts — to the new LLP under Section 56 of the LLP Act, 2008.
Client and Vendor Contract Redrafting:
Drafted 3 payment gateway agreements, 2 hosting/cloud service agreements, 4 freelance instructor agreements, 2 institutional client contracts, 1 marketing agency retainer, 1 co-working space lease, and 1 app store developer account.
Employment Contract:
Drafted a comprehensive employment contract template for the LLP covering: designation and reporting, compensation and benefits, probation and confirmation terms, notice period (30 days for junior staff, 60 days for senior), confidentiality and non-disclosure obligations, IP assignment clause (all content created by employees belongs to the LLP), non-solicitation during and after employment, termination terms, and grievance redressal.
POSH Compliance:
- Constituted a 4-member Internal Committee with Presiding Officer and Advocate Sunita Sharma as the External Member
- Drafted a POSH policy covering the definition of workplace, complaint process, inquiry procedure, confidentiality obligations, and interim relief provisions
- Conducted a 90-minute POSH awareness training for all 55 employees
- Conducted a separate 3-hour IC member induction covering complaint handling, evidence evaluation, and the written order format
- Filed the first annual report placeholder (noting zero complaints received in the period before the IC was constituted)
The Result
- LLP incorporated: Certificate of Incorporation issued in 12 working days
- Asset transfer: All assets moved from partnership to LLP with zero capital gains tax (Third Schedule compliant)
- Contracts transferred: All 14 client and vendor contracts re-executed under the LLP — zero relationships lost
- Employment contracts: All 55 employees on proper written contracts for the first time
- POSH compliance: Internal Committee constituted, policy in place, all employees trained
- Personal liability: Both partners now protected by limited liability — personal assets no longer at risk
- Business disruption: Zero. Not a single day of downtime during the entire conversion
- Total timeline: 60 working days from first consultation to full handover
What Happened to the Student's Legal Notice?
We replied to the student's legal notice on behalf of the LLP (not the partners personally — the first benefit of the conversion). We pointed out that the refund policy was clearly stated on the website and was agreed to at the time of enrolment, that the student had accessed 85% of the course content, and that the claim for "mental harassment" had no legal basis. The student did not pursue the matter further. Total cost of handling: included in the conversion engagement, no separate billing.
