Private Company VS Limited Liability Partnership

Private Company VS Limited Liability Partnership

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 and LLP
  • 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