While opening up a company, one has to choose which business organization they want to register and carry on. The choice of business organization is essential to give shape to your corporate motive. Here, if one has to select between the Private limited company registration or an LLP, one can see the advantages as well as the difference to choose what is best for them.
The private companies are those companies wherever the shares of the company are apprehended privately. They can function their Business themselves or hire directors to manage the company on their behalf. It is a business entity that is privately owned by some stockholders. It limits the owner liability to the extent of the shareholders and limits the number of shareholders to 50 only. It also restricts shareholders to trade shares publicly.
LLP Registration is a limited liability corporation. It is a new form of Business Corporation where both collaborations and corporations exist. Here the organization is with limited liability Corporation. It is listed under the LLP Act, 2008, and with the Ministry of corporate affairs(MCA).
Advantages of Private Limited Company Registration
- The obligation of the shareholders is limited to the extent of the shares held by them. The assets are not taken to repay the arrears of the company. Though there is one exception where there can be fraud committed concerning the company, it will refute the owner’s liability protection.
- There is restriction in the trade of shares; it is an advantage to the stockholders who doesn’t want to sell the shares to any outsider of the company. So, the risk of a hostile or unfriendly takeover is less.
- It has everlasting succession and has an independent identity that is different from its owners or stockholders. This states that the company will still stand and continue to exist even if the members expire or ceases to be a member further. The change in stockholders will not bring any result on the identity of the corporation. It will be similar with the same freedoms, protections, lands, and properties. It will last to exist until wound, as per the Companies Act 2013.
- It is a separate legal being. They have their own possessions, and obligation is a legal unit which can sue or can be sued or can hold property of the company. It is capable of owing the funds and other features. It is a legal individual under whose name the company’s capital is vested and is not of the shareholders.
Advantages of Limited Liability Partnership
- Any amount of capital can form LLP. There is no need for minimum money for LLP. It is to set up hassle-free and not troublesome for the owner.
- It requires a minimum of two partners, and there is no limit on the maximum number of partners required.
- The Cost of registering an LLP is low as compared to other business.
- All limited company have to get their accounts inspected, but in the case of LLP, there is no such requirement. Although it is required to review when the aids of LLP exceeds INR 25 lakh or annual turnover exceeds INR 40 lakh.
- The LLP has to file only two, i.e., annual return and statement of accounts and solvency.
- LLP is treated in similarity with the partnership firm. The establishment of dividend distribution tax is not payable on LLP. Also, under Section 40(b) deductions are allowed on the interest given to partners, any payment of salary bonus commission or remuneration. Problems with LLP:
- LLP can be bind by the act of one partner without the other partner, i.e., one partner can make all additional liable or bind them.
- They cannot raise money from the public.
Consequently the choice of the business organization depends upon the owner’s need like if one is considering raising funds in India, you should register as a company and not LLP. Private companies are considered more credible by investors than the LLP.
Private Limited Company Registration and Limited Liability Partnership are two different business structures governed by two various acts, specifically Companies Act 2013 and Limited Liability Partnership Act 2008, correspondingly. Together entities, i.e., Pvt Ltd and Limited liability Partnership, offer many similar features required to run a small to large-sized Business. At the same time, there are many modifications also in some aspects. In this article, we will discuss the comparison of Private Limited co. Vs. LLP, from the viewpoint of an Entrepreneur, was starting a new business
Comparison between Private Limited Company and Limited liability Partnership
There are few resemblances as well as a few modifications between both types of business administrations, that is the Private Limited Company and Limited Liability Partnership. Resemblances between Private Limited Company and Limited liability Partnership.
Separate legal entity
- Both of them have a separate legal being. Which means Private Limited Company or LLP is treated as a different individual in the eyes of the law.
Benefits of taxes (taxation)
- Both types of business, tax benefits are given. The tax benefits would be 30% of the profits.
- In the case of Private Limited Company liabilities of members, and the occurrence of LLP, the obligations of the partner will be incomplete.
- Private Limited Registration and LLP Registration. Both types of businesses are mandatory to be registered with the Ministry of Corporate Affairs.
Read our article:Guide on Difference between Private limited Company and LLP
Differences between Private Limited Company and Limited liability Partnership
|Particular||Private Limited Company||Limited Liability Partnership.|
|Applicable Law||Companies Act 2013||Limited Liability Partnership Act, 2008|
|Minimum share capital required||No requirement for minimum share capital.||No requirement for minimum share capital|
|Members essential||Minimum – 2 Maximum – 200||Minimum 2 Maximum – No limit|
|Directors essential||Minimum – 2 Maximum-15||Two designated partners Maximum – Not applicable|
|Board meeting conducted||Within 120 days of the preceding board meeting. Minimum 4 board meeting to be held each year.||Not necessary|
|Statutory Audit||Compulsory||Not compulsory unless the partner’s involvement exceeds INR 25 lakhs or annual turnover exceeds INR 40 lakhs|
|Annual Filing||Annual declaration of financial records & annual reoccurrence with ROC. These are filed in MGT 7 & FORM AOC 4.||Annual financial records and annual revenues to be filed with ROC. These revenues are filed in LLP FORM 8 and LLP form 11.|
|Transferability of shares||It can be transferred easily. The article of association can only restrict it.||Can be shifted by implementing agreement before a notary public|
|Foreign Direct Investment||Eligible via automatic and government route||Eligible via automatic route|
|Suitable to which type||Businesses are having turnover, entrepreneurs who need external funding.||Start-ups, Commercial, job, builders, etc.|
|Name of Company||Should end with Private Ltd.||Must end with LLP.|
|Fees of incorporation||Know the Fees of incorporation of Pvt Ltd Co.||Know the Fees of incorporation of an LLP.|
Note on Registration: LLP and Private Limited Company
The advantages of registration of a business as an LLP:-
- An LLP is more comfortable to start and succeed, and the procedure has fewer regulations;
- It has a lesser cost of registering as compared to a Corporation;
- LLP is like a business body having its presence other than its associates;
- LLP can be started with any quantity of minimum capital.
The compensations of registration Business as a Private Limited CompanyRegistration:-
- There is Not at all Minimum Capital Requirement in the company;
- The members have Limited Liability in this type of registration;
- Separate Legal entity;
- It is a dissimilar’person’ from the members who comprise it.
LLP and Private Limited Company have a lot of comparations, yet they both are dissimilar in many of its features and structures. If you are a business person who needs exterior funding and is pointing towards good income, a Private Limited Company Registration is a perfect business assembly for you. Whereas in case you are more than one person who needs to start the Business together with limited liability then LLP is for you.
Our CorpBiz group intend to be at your disposal if you seek expert advice on any aspect related with Private Limited Company Registration along with complete compliance. We will help you to make sure full compliance concerning all the requirements based on your anticipated activities, ensuring the productive and well-timed completion of your expectation.