Comparison: Limited Liability Partnership And Private Company
Limited Liability Partnership
Partnership Firms are the traditional business form still active in Indian business scene. LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. We will be pleased to assist you on the matters relating to the Registrations of Partnership Firm. For More details please contact us.
Benefits of Limited Liability Partnership
- No limitation on number of partners
- Cost effective comparing to Company
- Least compliance requirements
- Utmost privacy and prompt decision making
- No distinction between control, ownership and management
- Easy access to profit
- Easy to dissolve
Private Limited Company
Companies are the most accepted and refined business model in India because of the essential features like limited liability, separate legal entity, transferability of shares, rising of fund from public. Moreover, Companies are regulated by Ministry of Corporate Affairs of India, and is governed primarily by Companies Act 2013. Private Limited companies are the most popular choice of corporate entity amongst small, medium and large businesses, while One Person Company (OPC) is an ambitious step for bringing in the flexibility sole proprietorships with the same allure of a private Limited Company.
A Private limited company is the most popular choice among entrepreneurs and startups, as it offers more stability and possibility to expand and grow. If you want to start a business in India, a private Limited company should be on top of your list due to its following advantages;
Benefits of Private Ltd Company
- No minimum limit for share capital
- Easy registration process (days)
- Easy to manage and less compliances compared to other form of companies
- Great Flexibility
- Transferability of shares is easier
- Limited Liability
Comparison of Private Limited Company Vs Limited Liability Partnership
Basis | Private Limited Company | Limited Liability Partnership |
Requirement of Registration | Registration is compulsory with Registrar of Companies | The Registration is compulsory |
Applicable Law | The company is created by incorporation under the Companies Act 2013. | The LLP is guided by the provisions of the Limited Liability Partnership Act 2008. |
Capital Contribution | No minimum amount is prescribed | No minimum amount is prescribed |
Perpetual succession (ability of an entity to survive despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member) | A company is a mere abstraction of law. So its existence is not affected by the change of membership or death or insolvency of its members | A limited liability partnership can continue its existence even after the retirement, insanity, insolvency or even death of one or more partners. Further, it can enter into contracts and hold property in its name. |
Legal entity status (A “legal person”. The entity has its own legal rights and obligations, separate to those running and/or owning the entity) | A company is a body corporate and a legal person having a corporate personality distinct from its members. The members are not liable for the acts of the company. | An LLP has legal existence distinct from its members. Further, it is completely liable for its assets. Also, the liability of the partners has certain limitations in their contribution to the LLP. |
Liability | Limited to the extent of unpaid capital. | the liability of each partner has limitations to his agreed contribution to the LLP. It provides personal liability protection to its partners. |
Ownership of property | The company independent of the members has ownership of assets | Every Limited Liability Partnerships must have at least two partners and at least two individuals as designated partners. There is no maximum limit on the number of maximum partners in the entity. |
No. of shareholders / Partners | Minimum of 2 shareholders. In a private company, maximum of 200 shareholders | Minimum 2 partners and Designated partners |
Management of entity | Managed by Board of Directors | The partners of the LLP can manage their business. |
Meetings | Board Meetings and General Meetings are required to conducted at appropriate time | No requirement of meetings |
Reporting | Annual Accounts and Annual Return to be filed with Registrar of Companies in Form MGT7A and Form AOC 4. | LLP is required to file Statement of Accounts & Solvency’ in prescribed LLP Form 8 and Annual Return in Form 11 |
Credit worthiness | Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness | Creditworthiness of firm or Proprietorship depends upon goodwill and creditworthiness of its partners and Proprietor |
Audit of Accounts | Compulsory | Not Compulsory for LLP’s with Turnover below 40 Lacs |
Receipt of Foreign Direct Investment | Permitted | Permitted |
Taxation | The income is taxed at 22% + surcharge+cess | The income is taxed at 30% + cess LLP |
Drawings of Funds | The unauthorized withdrawals are not permitted and shall be treated as deemed dividend. | No limitation of drawings |
Salary to Directors or Partners | No limitation on amount of salary. | Salary is limited based upon the profit of the LLP |