Difference between Private Limited Company vs LLP

Difference between Private limited company Vs LLP
https://taxguru.in/company-law/difference-private-limited-company-llp.html
While starting up a company one has to decide which business organization they want to incorporate and
carry on. The choice of business organization is very important to give shape to your business motive. Here,
if one has to choose between the Private limited company registration and LLP one can see the advantages
and the difference so as to choose what’s best for them.
Private company are those companies where the all shares of the company are held privately. They can
operate their business themselves or hire directors to manage the company on their behalf. It is a business
entity which is privately held by some shareholders. It limits the owner liability to the extent of their
shareholding and limits the no. of shareholders to 50 only. It also restricts shareholders to trade shares
publically.
Advantages:
· The liability of the shareholders is limited to the extent of their shareholding their personal assets are not
taken to repay the debts of the company. Although this has one exception where there is fraud
committed in relation to the company it will negate the owner’s liability protection.
· There is restricted trade of shares, It is an advantage to the shareholders who do not want to sell the
shares to the outsiders. So the risk of hostile takeover is low.
· It has perpetual succession and has an independent identity which is different from its owners or
shareholders. It means that the company will still and continue to exist even if the members die or ceases
to be a member. The change in shareholders will not bring any effect on the identity of the company. It
will be the same with same privileges, immunities, estates and possessions. It will continue to exist till
wound up is there according to the Companies Act 2013 or any relevant act.
· It is a Separate legal entity. It has its own assets and liability is a legal entity which can be sued or sue or
can hold and dispose of property of the company. It is capable of owing the funds and other properties.
It is a legal person under whose name the company’s property is vested and is not of the shareholders.
· There are few shareholders the decisions taken are quick and prompt. They are governed by the
Companies Act 2013 and have to follow the procedures and disclosure norms under the act.
· Income tax act 1961 provides a lower tax burden and rates for the companies compared to other type of
business.
· A company being a legal entity has the power to sue in its name and can be sued by others.
LLP
LLP Registration is limited liability partnership. It is new form of business where both partnership and
corporation exists. Here the partnership is with limited liability. It is registered under LLP Act, 2008 and with
Ministry of corporate affairs.
Advantages of LLP:
· LLP can be formed by any amount of capital. There is no need for minimum capital for LLB. It is so set up
hassle free and not burdensome on the owners.
· It requires a minimum of 2 partners and there is no limit on the maximum number of partners of the LLP.
· The cost of registering LLP is low as compared to a company.
· All limited companies have to get their accounts audited but in case of LLP there is no such requirement.
Although it is required to audit when the contributions of LLP exceed Rs. 25 lakh or annual turnover
exceeds Rs. 40 lakh.
· The LLP has to file only two i.e. annual return and statement of accounts and solvency.

· LLP is treated in par with the partnership firm. The provision 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 other
liable or bind them.
· They cannot raise money from public.
Difference between the LLP and Private Limited Co.
S.
No.
Factors of
comparison
Private limited company Limited liability partnership
1. Maximum number
of members
200 None
2. Requirements for
compliance
Annual return filling board
meetings and general meetings
Annual return filling and
Statement of Account &
Solvency.
3. Audit compulsory Only if contribution more than
Rs. 25 lakhs or turnover exceeds
Rs. 40 Lakhs
4. Lower cost of
Formation
MyOnlineCA.in charges – Rs. 4000
Legal charges – Rs. 12,000
MyOnlineCA.in charges- Rs. 3000
Legal Charges- Rs. 7000
5. Conversion Can be converted to LLP Cannot be converted into a
company
6. Procedure Obtain DSC (Digital Signature
Certificate) Obtain DIN (Directors
Identification Number) Name
Approval Filing for Incorporation
Obtain DSC (Digital Signature
Certificate) Obtain DPIN
(Designated Partner
Identification Number) Name
Approval Filing for Incorporation
File LLP Agreement
7. Time for registration 15-20 days 10-15 days
8. Dividend
distribution tax
Apply Not apply
So the choice of the business organization depends upon the owners 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 the investors then the LLP.
(About the Author:- Mahak Vijay is content manager at myonlineca (a leading online business legal registration portal).

Top 7 Differences Between Private Limited and LLP Company Formation
https://smejoinup.com/blog/differences-between-private-limited-and-llp-company/
There are a large number of differences between private limited and LLP Company. These are two modern
forms of organizations that an entrepreneur can start. Entrepreneurs have various options to choose from while
registering a new company in India.
These forms differ on legal aspects as well as the control that the entrepreneur has on the enterprise. Each of these
forms can have benefits as well as complications. Hence; requires to picked only after weighing their pros and
cons. These include the level of risk and liabilities the founder of the company has to bear. Next, the degree of
control that the owner wishes to exercise in the organization. Additionally, factors like type of business, the size of
its operations and tax implications affect the selection of the form. Lastly, the capital requirement for starting and
running the business also affects this choice.
‘Limited Liability Partnership’ or LLP format. LLP is introduced as a sophisticated and legal version of the existing
partnership companies in India. It has empowered many entrepreneurs by addressing challenges of the traditional
partnership form. However, when compared to private limited companies, both these forms starkly differ on certain
aspects.
Following are the differences between private limited and LLP Company which help an entrepreneur decide
the most suitable one.
India has over 15.27 lakhs of registered companies as per data compiled by corporate affairs
ministry: Economic Times, February 2016
1. Recognition
A privately limited form of business has been in existence for a long time which enjoys a widespread acceptance
and recognition across the country and the world. Thus, it has established processes and procedures. Therefore,
the procedures and rules are still new and evolving. LLP’s has become popular since they offer the benefits of a
private limited company and addresses the downsides of a partnership business. LLP’s have proven to significantly
economical to start and maintain.
2. Formation Process Differences Between Private Limited and LLP Company
The registration procedures for both the forms of organizations are very similar with few differences in the
documentation and incorporation process.
Both types of company structure require obtaining Digital Signatures Certificates (DSC) and Director Identification
Number (DIN) for directors. It also requires Designated Partner Identification Number (DPIN) for partners, obtain
name approval from MCA and filing for incorporation.
Additionally; private limited companies need to create and issue a memorandum and articles of association. A
copy of which is filed with the Registrar of Companies (RoC). For companies filing under LLP requires producing
an LLP agreement among the partners.
3. Registration Costs
When it comes to cost; differences between private limited and LLP Company is something every entrepreneur
would like to consider. A private limited company registration costs approximately Rs. 20000/- to start. This
includes the cost of documentation, filing for the name and few licenses. However, there is a recurring cost annually
of Rs. 15000-20000/- to maintain a private limited company. LLP registration cost is economical in comparison.
It approximately costs Rs. 15000/- to register and Rs. 4000/- to comply with MCA regulations.
4. Legal Aspects
Both the forms of organizations, separate the ownership of the founders or directors of the company. Each of the
forms has its own legal existence and a company common seal. Both the companies cease to exist forever unless,
and otherwise the promoters of the company or competent authorities decide to close the business.
Regarding the closure of a private limited form of company is technically more challenging and time-consuming
as compared to LLP. A private limited company is registered under the Companies Act, 2013. LLP is registered
under the Limited Liability Partnership Act, 2008.
Source
5. Ownership
Another significant differences between private and LLP Company is that a Private limited companies are more
flexible regarding ownership of the enterprise due to easy transfer of shares as compared to LLP. Since
shareholders do not participate in the management of the business, the shareholders and the management are
distinguished. This form becomes more advantageous due to this feature. In the LLP format, there is no clear

distinction between the owners and the management. The LLP partners hold the ownership of the company along
with the power to manage it.
6.Compliance Requirement
When comparing the differences between private and LLP Company, the latter one enjoys a significant
advantage as compared to private limited companies.
An LLP doesn’t have to audit its books of accounts if the revenue is less than 40 Lakhs or capital contribution is
less than 25 Lakhs. On the other hand, a private limited company has to audit its books of accounts annually.
7. Fines, Penalties, and Taxes
Another major differences between private limited and LLP Company is companies formed under private
limited companies have to comply with MCA regulations. If a company is non-compliant, it is liable to pay hefty
fines of up to Rs. One Lakh every year. At the same time, LLP has simple structure and policies that ensure that
business owners skip the fines altogether. LLP forms are much simpler from taxation purposes since there are only
two forms of tax applicable, income tax and alternative minimum tax. However, a private limited company has to
pay a tax of the earning of the company, dividend distribution tax, and alternate minimum tax. Thus the tax
benefits of LLP over PVT Company are more beneficial for the enterprises.
Private limited companies have enjoyed a wider acceptability and possess a greater applicability across the world.
For private limited companies, it is easier to raise funding and offer employee stock options to attract talent to the
company. Another major difference between private limited and LLP Company is that the entrepreneur saves
time on compliance matters. Whereas; running an LLP company, which is a taxing process while managing a private
limited company.
Consider the above mentioned differences between private limited and LLP Company if you are starting a
new firm.
Difference between business Formations
TYPE OF COMPANY
BASIS
Proprietorship Partnership LLP
Private limited
company
OPC
Registration
Not Compulsory
Optional under
partnership act 1932
Registered under
MCA
Registered under
MCA
Can be registered
under MCA and
Companies Act 2013
Legal status of entity Not considered as a
separate legal entity
Not considered as a
separate legal entity
Considered to have
a separate legal
entity
Considered to
have a separate
legal entity
Separate legal entity
Members liability
Unlimited liability Unlimited liability
Liability of its
members is limited
Limited to the
extent of share
capital
Limited to the extent
of share capital
Minimum number of
member Sole Proprietorship
At least 2 persons
At least 2 persons At least 2 persons
Minimum number of
1 person
Maximum number of
members
Maximum 1 person Banking Sector – 10
Other Sector – 20
No restriction
200
Maximum 2 person
Foreign ownership
Not allowed Not allowed
Allowed by
permission from RBI
Allowed
Allowed if one is the
director and other is
the nominee. Both
the director and the
nominee cannot be
foreign citizens
Transferability
Not allowed Not allowed Can be transferred
Can be
transferred
Allowed to 1 person
only
Survival
comes to end on death
or retirement of the
member
comes to end with
the death of its
anyone member
Existence
independent on
partners
Life of the
company will go
on forever
Existence is
independent on
directors or nominee
Taxation
Taxed as an individual
Tax rate is 30% on
the company’s profit
Tax rate is 30% on
profits plus cess and
surcharge
Tax rate is 30%
on profits plus
cess and
surcharge
Tax rate is 30% on
profits plus cess and
surcharge
Annual filings
Income tax returns
with the registrar of
the company
Income tax return is
filed with the
registrar of the
company
Filed with the
registrar of the
company
Filed with the
registrar of the
company
Filed with the
registrar of the
company

7 Reasons to opt for a Private Limited Company
Lionel Charles posted on 3rd July 2015 https://yourstory.com/2015/07/private-limited-company/
Starting a business is one of the most interesting and rewarding experience of anyone’s life. One of the critical
decisions made by the entrepreneur while starting this journey is the selection of his business entity. The
choice of the business entity has long term implications for throughout the business’ life-cycle. Hence, it is
important to discuss your business plan with a professional, and choose an entity that will support the vision
of the business. In this article, we look at 7 Reasons you should opt for a Private Limited Company.
Build a Great Team
"Employees are a company's greatest asset - they're your competitive advantage. You want to
attract and retain the best; provide them with encouragement, stimulus, and make them feel
that they are an integral part of the company's mission." - Anne M. Mulcahy
Great businesses are a product of great teams. Success in business is no longer determined by the
capabilities of one person. Success in business is now determined by having the ability to quickly build great
teams.
Image Credit "ShutterStock"
Today, high performing employees are looking for more things than just a high salary. Therefore, to attract
and retain good talent, businesses are offering a number of benefits like stock ownership, flex-time
and training. Of the benefits provided, stock ownership is one of the most valued among prospective hires
or existing employees. Employees who have stock ownership or ESOPs feel they are a part of the business,
and it helps improve morale, retention and profits.
Therefore, it is important for any business today to have the option of providing stock ownership or ESOPs
to employees. Only private limited companies and limited companies can offer stock ownership and ESOP
plans.
Attract Funding
“An entrepreneur without funding is a musician without an instrument.” -Robert A. Rice Jr.
Funding is essential for starting, maintaining, and growing a business. A business can be self-funded, funded
by friends and family, or by debt or equity. Growing a business today requires all four types of funding.
Proprietorships, partnership firms, and Limited Liability Partnerships cannot issue shares, and are thereby
unable to attract equity funding. This disadvantage could be critical in the growth stages of a business,
wherein the business requires equity capital from sources like friends, family, angel investors or private equity
firms to grow quickly.
Today small businesses are being out-competed by larger businesses. Hence, it is essential for all businesses
to grow quickly, and have the ability to attract funding from any source. Thus, a private limited company is
the ideal type of business entity for growing businesses.
Limit the Risk to Personal Assets
"Do not leave yourself or your family unprotected against financial storms... Build up savings."
- Ezra Taft Benson
Profit and loss are a part of a business. Therefore, it is important to be protected against losses, to protect
our near and dear ones in case of financial difficulties. If a business owner has "limited liability" protection,
it means that only the assets of the business are at risk, and not the promoter’s personal assets such as
personal bank accounts, cars and houses.
Therefore, it is important to register an entity that provides limited liability protection to its shareholders,
such as a private limited company, a one person company, a limited company, or a limited liability
partnership.
Improve Business Credibility
"If people like you they will listen to you but if they TRUST you they will BUY from you."- Zig
Ziglar

Today customers, vendors and investors look for credibility in the businesses they deal with. If a business is
started as a proprietorship or partnership firm, the business is not registered with the Ministry of Corporate
Affairs and cannot be located in the online company or LLP databases. Oftentimes, there is no credible proof
of the business’ existence, making it hard to open a bank account, acquire reputed customers, or obtain
credit from vendors.
In starting a private limited company, the information relating to the company, such as name of the company,
date of incorporation, registered office address, status of the company, and other information are made
available in a publicly searchable database. This feature makes it easy to authenticate the existence of the
business, improving business credibility.
Pursue Multiple Opportunities
"Steve Jobs, Jack Dorsey, and Elon Musk, have created several multibillion-dollar companies. If
success was mostly a matter of luck, these types of serial entrepreneurs probably wouldn’t
exist.”
Successful entrepreneurs are often serial entrepreneurs, who go on to repeat the success they have in one
business in multiple other ventures. They are also good at spotting opportunities early on and quickly move
to exploit it. Virgin Group’s Richard Branson has reminisced about how he and his friends, when running a
student magazine at the age of 16, noticed that the readers were interested in music, and started a mail-
order record business. They ran ads in their magazine to promote it. The two businesses complemented each
other well and developed synergies. Today the Virgin Group operates hundreds of companies over a range
of industries.
Businesses started as a proprietorship or partnership would have trouble pursuing many opportunities that
come their way, as they are not considered separate legal entities and are tied to the promoter. Starting
a private limited company, on the other hand, would allow the promoter to pursue multiple opportunities
as the business evolves over time.
An Exit Plan
“Exits are the best part of being an entrepreneur or investor. It is when we get financially
rewarded for all of the creativity, hard work, investment and risk we put into our companies.”
- Basil Peters
Most entrepreneurs, while launching their businesses, only think about expanding their businesses, and never
have an exit plan. An exit plan is essential for every business to capitalize, and for entrepreneurs to get
rewarded for all their hard work. Further, the entity choice made at the start of the business, without any
consideration for an exit plan, could have huge implications down the road.
Private limited companies offer the best type of exit strategy for all promoters. Only shares of a company
can be sold or transferred in part or whole to another entity easily without any hassles, while the business
remains a going concern. Therefore, starting a private limited company provides a tremendous edge in
planning and executing a business exit plan.
Going International
"With over 1 billion users and counting worldwide, the Internet has quickly become a critical
place for individuals, business communities and governments to share and distribute
information." -Robin Hayes
The internet has made the world a smaller place. Gone are the days when Indian companies would develop
products for foreign businesses. Today, Indian startups are developing products that compete on a global
scale, and Indian businesses are started with aspirations to becoming multinational corporations.
Investments from and collaborations with foreign businesses play an important role in the journey to
becoming a multinational corporation.
Private limited companies and limited companies are the only types of entities that allow for Foreign Direct
Investment of upto 100% through the automatic route, meaning, any foreign entity or foreign person can
invest in a company without any prior government approval. Entities like proprietorship, partnership and
limited liability partnership require prior approval from the Government to accept investments from foreign
entities. Therefore, if your business has aspirations for going international, then it is best to start a private
limited company.

Difference between Private Limited Company vs LLP

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