Limited Liability Partnership (LLP) is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. … The LLP shall be a body corporate and a legal entity separate from its partners.
LLP is one of the easiest types of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLPs are preferred by Professionals, Micro and Small businesses that are family-owned or closely-held. Since LLPs are not capable of issuing equity shares, LLP should NOT be chosen for any business that has plans for raising equity funds from Angel Investors, Venture Capitalist or Private Equity Funds.
Difference between LLP & Company
Private Limited Company and Limited Liability Partnership are two different business structures governed by two different acts namely Companies Act 2013 and Limited Liability Partnership Act 2008 respectively. Both entities i.e. Pvt Ltd and Limited liability Partnership offer many similar features required to run a small to large sized business, while there are many differences also in some aspects. In this article we will discuss comparison Private Limited co. vs LLP from the viewpoint of an Entrepreneur starting a new business.
What is the meaning of Pvt Ltd and LLP?
A Private Limited Company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded.
A limited Liability Partnership means a business where minimum two members are required and there is no limit on the maximum number of members. The liability of the members of an LLP is limited.
Comparison between LLP vs Pvt Ltd Co:
LLP vs pvt ltd company which is better? There are few similarities as well as a few differences between both types of business organisations i.e the Private Limited Company and Limited Liability Partnership. Let us discuss both here for better understanding.
Similarities Between Pvt Ltd and Limited liability Partnership:
Separate legal entity: Both of them have separate legal entity. That means Private Limited Company or LLP is treated as a different individual in the eyes of law.
Benefits on taxes (taxation): To the both types of business structures tax benefits are given. The tax benefits would be 30% from the profits.
Limited Liability: In case of Private Limited Company liabilities of members and in case of LLP the liabilities of the partners would be limited.
Registration Process: Pvt Ltd registration and LLP registration, Both the types of businesses are required to be registered with the Ministry of Corporate Affairs
Private Limited co. vs LLP Quick Comparison Table:
| Particulars | Pvt Ltd Co. | Limited Liability Partnership. |
|---|---|---|
| Law Applicable | Companies Act 2013 | Limited Liability Partnership Act, 2008 |
| Minimum share capital | No requirement for minimum share capital. | No requirement for minimum share capital |
| Members required | Minimum two Maximum 200 | Minimum two Maximum No limit |
| Directors required | Minimum two Maximum 15 | Two designated partners Maximum not applicable |
| Board meeting | Within 120 days of the previous board meeting. Minimum 4 board meetings to be held each year. | Not necessary |
| Statutory Audit | Mandatory | Not compulsory unless partner’s contribution exceeds 25 lakhs or annual turnover exceeds 40 lakhs |
| Annual Filing | Annual statement of accounts & annual return with ROC. These are filed in form AOC 4 and MGT 7. Check more details here | Annual accounts and Annual returns to be filed with RoC.. These returns are filed in LLP form 8 and LLP form 11. Check more details here. |
| Compliance | High | low |
| Liability | Limited | Limited |
| Transferability of shares | Can be transferred easily. It can only be restricted by Article of association. | Can be transferred by executing agreement before a notary public |
| Foreign Direct Investment | Eligible via automatic and government route | Eligible via automatic route |
| Suitable to which type | Businesses having turnover, entrepreneurs who need external funding. | Startups , Business, trade, manufacturers etc. |
| Company Name | Should end with Pvt. Ltd. | Should end with LLP. |