LLP vs Pvt Ltd company – Comparison between two important forms of organization in India
Introduction
India offers various business structures for entrepreneurs to establish their businesses. Deciding for the right business structure becomes important for entrepreneurs. It affects how the business runs, handles risks, raises money, and builds trust. For the same purpose, this article differentiates elaborately to help you choose between an LLP and a Pvt Ltd Company.
What is an LLP(Limited Liability Partnership)?
An LLP (Limited Liability Partnership) is a business where partners share profits but are not personally responsible for company debts. It offers flexibility like a partnership and legal protection like a company.
Benefits of an LLP
An LLP serves the following benefits:
- Easy to start and manage with fewer formalities.
- Lower registration cost than a company.
- Exists separately from its partners.
- Continues even if a partner dies.
- Can start with minimal capital.
- Partners have limited liability.
Company Registration for an LLP
Follow these simple steps to register for an LLP:
- Get DSC: For online document signing.
- Apply for DIN: Unique ID for partners.
- Reserve Name: Submit the LLP-RUN form.
- File FiLLiP: For incorporation approval.
- Get Certificate: Proof of registration.
- File LLP Agreement: Defines partner roles.
- Apply for PAN & TAN: For taxation.
- Register for GST: If turnover exceeds the limit.
- Open Bank Account: Using LLP documents.
What is a Pvt Ltd Company?
A Pvt. Ltd. Company is a privately owned business with limited liability. It has shareholders, a legal identity, and must follow company laws. It can’t publicly trade shares like a public company.
Benefits of a Pvt Ltd Company
The Pvt Ltd Company comprises the below-mentioned advantages:
- No minimum capital is needed to start.
- Owners have limited liability.
- Company is a separate legal entity.
- It continues even if owners change.
- Easy to raise funds.
Company Registration for a Pvt Ltd Company
These easy steps can help you to register your Pvt Ltd Company without any issue:
- Get DSC : Required for online document signing.
- Apply for DIN : Unique ID for directors.
- Reserve Name : Submit SPICe+ Part A.
- File SPICe+ Form : For incorporation approval.
- Get Certificate : Proof of registration.
- Draft MOA & AOA : Defines company rules.
- Apply for PAN & TAN : For taxation.
- Register for GST : If turnover exceeds the limit.
- Open Bank Account : Using company documents.
We offer comprehensive business compliance services, including Pvt Ltd annual filing, and LLP annual return filing. Also registration services including Register Pvt Ltd company, and LLP registration online with expert guidance and online processes.
Similarities between an LLP and a Pvt Ltd Company
Not only distinctions, but these two structures also have similar characteristics to adhere to:
| Aspect | LLP | Pvt Ltd Company |
| Separate Legal Entity | Yes | Yes |
| Limited Liability | Yes, partners’ liability is limited | Yes, shareholders’ liability is limited |
| Registration | Registered under MCA | Registered under MCA |
| Compliance | Annual filings required | Annual filings required |
| PAN & TAN Requirement | Mandatory | Mandatory |
| Taxation | Corporate tax applies | Corporate tax applies |
| Perpetual Succession | Continues even if partners change | Continues even if shareholders change |
| Foreign Investment (FDI) | Allowed in certain cases | Allowed under regulations |
| Governing Body | MCA & ROC | MCA & ROC |
| Profits Distribution | As per LLP agreement | As per shareholding |
Differences between an LLP and a Pvt Ltd Company
An LLP and a Pvt Ltd Company differ in various terms and aspects:
| Particulars | Private Limited Company | Limited Liability Partnership (LLP) |
| Governing Act | Companies Act | LLP Act |
| Best For | Tech Startups, Medium Enterprises | Consultancy, Professional Services |
| Owners | 2-200 Shareholders | 2-Unlimited Partners |
| Capital Requirement | No minimum, but ₹1L advised | No minimum, ₹10K suggested |
| Tax Rate | 25% | 30% |
| Fundraising | Easy from investors | Difficult |
| Share Transfer | Easy via AOA | Requires partner consent |
| ESOPs | Allowed | Not allowed |
| Legal Documents | MOA & AOA | LLP Agreement |
| Compliance | More rules, audits, 4 board meetings, annual filings (AOC-4, MGT-7) | Fewer rules, no board meetings, audits only if turnover > ₹40L, filings (Form 8, Form 11) |
| Registration Form | SPICe+ | FiLLiP |
| Dissolution | Complex (Form STK-2) | Easier (Form 24) |
| Funding Options | Can raise funds from VCs, Angel Investors, Equity Shares | Limited funding, mainly partner contributions & loans |
Conclusion
LLP and Pvt Ltd companies have different benefits to serve. LLPs offer flexibility and fewer compliances, while Pvt Ltd companies provide better funding options and authority. Choosing the right structure depends on business goals and plans. Entrepreneurs are liable to decide based on their needs and growth vision.
Whatch Video for more detail
Suggested Read :
Importance of an LLP Certificate
Compliances of Pvt Ltd Company
FAQ
1. Which is better, LLP or Pvt Ltd?
LLP is better for small businesses needing flexibility and low compliance. Pvt Ltd is better for startups needing investment and growth. Choose based on business goals, funding needs, and compliance ease.
2. Can LLP be converted to PVT Ltd?
Yes, an LLP can be converted to a Pvt Ltd company as per MCA rules.
3. Who owns an LLP and a private limited company?
LLP is owned by partners, while a Pvt Ltd company is owned by shareholders.
4. What is the minimum turnover for a Pvt Ltd company and an LLP?
There is no minimum turnover requirement for either.
5. How long does it take to register an LLP vs. Pvt Ltd?
LLP takes about 10-15 days, while a Pvt Ltd company takes 7-10 days.
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