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What are the difference between Company & LLP?” link=”https://www.mydreamconsultant.com/private-limited-company-vs-llp/” description=”UHJpdmF0ZSBMaW1pdGVkIENvbXBhbnkgVnMgTExQLiBXaGF0IGFyZSB0aGUgZGlmZmVyZW5jZSBiZXR3ZWVuIENvbXBhbnkgJiBMTFA/” icons_boxed=”yes” icons_boxed_radius=”” color_type=”brand” icon_colors=”” box_colors=”” tooltip_placement=”” pinterest_image=”” pinterest_image_id=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” /][/fusion_builder_column][fusion_builder_column type=”1_2″ type=”1_2″ layout=”2_3″ spacing=”3%” center_content=”no” link=”” target=”_self” min_height=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” hover_type=”none” border_size=”0″ border_color=”” border_style=”solid” border_position=”all” box_shadow=”no” box_shadow_blur=”0″ box_shadow_spread=”0″ box_shadow_color=”” box_shadow_style=”” background_type=”single” gradient_start_position=”0″ gradient_end_position=”100″ gradient_type=”linear” radial_direction=”center” linear_angle=”180″ background_color=”rgba(239,239,239,0)” background_image=”” background_image_id=”” background_position=”left top” background_repeat=”no-repeat” background_blend_mode=”none” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=”” filter_type=”regular” filter_hue=”0″ filter_saturation=”100″ filter_brightness=”100″ filter_contrast=”100″ filter_invert=”0″ filter_sepia=”0″ filter_opacity=”100″ filter_blur=”0″ filter_hue_hover=”0″ filter_saturation_hover=”100″ filter_brightness_hover=”100″ filter_contrast_hover=”100″ filter_invert_hover=”0″ filter_sepia_hover=”0″ filter_opacity_hover=”100″ filter_blur_hover=”0″ first=”false” last=”false”][fusion_imageframe image_id=”1575|large” max_width=”” style_type=”glow” blur=”14″ stylecolor=”#0a0026″ hover_type=”none” bordersize=”0″ bordercolor=”” borderradius=”” align=”none” lightbox=”no” gallery_id=”” lightbox_image=”” lightbox_image_id=”” alt=”” link=”” linktarget=”_self” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=””]https://www.mydreamconsultant.com/wp-content/uploads/2020/05/Pvt-Ltd-Co-vs-LLP.-What-is-best-for-a-new-business-or-start-up-1024×651.jpg[/fusion_imageframe][fusion_text columns=”” column_min_width=”” column_spacing=”” rule_style=”default” rule_size=”” rule_color=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=””]
Pvt Ltd Co vs LLP? What is best for a new business or start-up
Private limited company and Limited Liability Partnership (LLP) are the two most popular type of business in India. Both are governing with the different acts i.e. LLP is govern by the Limited Liability Partnership Act, 2008 and Private Limited Company are govern by the Companies Act, 2013. But the governing body of both entities are the same which is known as Ministry of Corporate Affairs, Government of India.
In recent time is seated and administered by Respected Shri Nirmala Sitaraman (Finance Minister). In this article we discuss which will be the better form of for your small business or MSME sector suitable for you and which is more compatible for an entrepreneur starting a new business.
First of all we will discuss about the Private Limited Company
What is Private Limited Company ?
Private Limited company means a company registered under section 2(68) of the Companies Act, 2013. i.e.
“Private company” means a 8[company having a minimum paid-up share capital 4[Omitted] as may be prescribed, and which by its articles],—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased,
shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company;
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Thus, in short there are following characteristics of Private Limited Company;
1. No Minimum Capital required
2. Can be start with two person only
3. There can be maximum 200 person in private limited company
4. Restriction on transfer of shares to public
5. Having speciality of Separate Legal Entity
6. Limited Liability of Member
7. Less tax rate i.e. 25%
8. Govern by the Companies Act, 2013 and rules made thereunder
9. Having feature to raise funds by debentures and ECB if required
LEGAL COMPLIANCE TO BE DONE BY A PRIVATE LIMITED COMPANY WITHIN THE YEAR
There are following compliance to be done by the private limited company within the year;
1. DIR-3-KYC of its director: on or before 30th September of the related preceding financial year
2. MSME-1 e-Form: to be file within 30 of end of financial year having details regarding the dues of MSME sector on company whether they have been paid properly or not
3. DPT-3: to be file on or before 30th June of every year and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company.
4. ADT-1: Information regarding related to the Auditor appointment within 30 days of AGM
5. Income tax Return filling
6. AGM of members on or before 30th September
7. Atleast 4 board meeting of its director
8. AOC-4: To be file within 30 days of AGM having details regarding the financials of company
9. MGT-7: Annual return of Company
Now we should discuss about the LLP
What is LLP?
LLP stands for Limited Liability Partnership. It is extended form of business from partnership firm with the features of private limited company. This concept of introduced by the Government of India in the year. This is governed by Limited Liability Partnership Act, 2008 and rules made thereunder.
Definition: It is a type of Partnership form of business having the feature of limited liability and separate legal entity. According to section 2(1) (n) of the act “limited liability partnership” means a partnership formed and registered under this Act.
Further, it is a contractual obligation between the partners of LLP called LLP Agreement. This agreement defines rights, liabilities, duties and powers of the partners and designated partners of the LLP. But there are limited sources of funding in LLP in comparison of Private Limited Company.
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Thus, there following characteristics of an LLP can be categories as follows;
1. Separate legal entity:
The LLP is treated as a separate legal entity that means it may have its owned assets and liabilities. It can enter into agreement with any person and can sued and be sued.
2. Limited Liability of Partners:
The liability of partners of LLP is limited whereas in traditional partnership firm personal assets may be used as attachment for repayment of debt.
3. Sharing of profits:
The percentage or part of profit of partners are decided by LLP agreement between the partners
4. No minimum capital requirement:
The LLP can be start with any amount of capital. There are no minimum capital criteria for registering the LLP in India.
5. Less Compliance:
The LLP is having the mix feature of partnership firm and a private limited company. Instead of this the LLP is having the feature of very less compliance in compare to Private Limited Company.
6. Body Corporate:
LLPs are distinct legal entities having an existence separate from their partners.
7. Minimum and Maximum no. of partner:
An LLP must have at least two partners and designated partners and there is no cap on maximum number of partners in LLP
8. Conversion in LLP:
Any private limited company and an unlisted public company can be converted into LLP as per the Companies act 2013.
9. Minimum tax Rate:
The tax rate is 30 % on LLP with the exemption of salary to partner as define in the act.
10. Less sources of Funding: there are less sources of funding in LLP
LEGAL COMPLIANCE TO BE DONE BY A LLP COMPANY WITHIN THE YEAR
1. DIR-3-KYC of its Designated Partners: on or before 30th September of the related preceding financial year
2. Form-11: an annual return of LLP to be file within 60 days of end of financial year
3. Form-8: It is a return form in which the financials of LLP is filed
CRUX:
Private Limited Company and LLP have a lot of similarities yet they both are different in many of its characteristics and form of business and in terms of regulatory body.
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.
If you are going to form a business for less legal compliance with the features of both Partnership firm and Private Limited Company, we are suggesting you that LLP will be best for you. Because running and compliance cost is very less of LLP.
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