LLP Vs Pvt Ltd – Comparison between two important forms of organisation in India
LLP Vs Pvt Ltd – A comparison between two important forms of organisation in India
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 Pvt Ltd. vs LLP from the viewpoint of an Entrepreneur starting a new business.
Table of Content
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 Private Limited Company
LLP vs Pvt. Ltd. Co., 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 and 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 no limit
|Directors required||Minimum two
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.|
|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.|
|Fees and Cost of Incorporation||Know the Fees and cost of incorporation of Pvt Ltd Co. here||Know the Fees and cost of incorporation of an LLP. here|
|How to start / register?||Check all the details here||Check all the details here|
Advantages of Pvt Ltd and Limited Liability Partnership
The advantages of registering a business as an LLP
- An LLP is easier to start and manage and the process has fewer formalities
- It has a lesser cost of registration as compared to a Company
- LLP is like a corporate body having its existence other than its partners
- LLP can be started with any amount of minimum capital
The advantages of registering Business as a Private Limited Company
- There is No Minimum Capital Requirement in the company
- The members have Limited Liability
- It is a Separate Legal entity
- It is a different ‘person’ from the members who compose it
Suggested Read from Ebizfiling: Advantages of Private Limited Company
Pvt. Ltd. Co. and LLP have a lot of similarities yet they both are different in many of its characteristics and structures. If you are an entrepreneur who needs external funding and are aiming towards good turnover, a Private Limited Company is a perfect business structure for you.. While in case you are more than one person who wishes to start the business together with limited liability than Limited Liability Partnership is for you.
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