Difference Between Private Limited Company VS LLP: Generally there is a confusion among the startups in India about the nature of the entity to start their business with. In order to solve their confusion, they do lots of research online to select the best suitable nature of entity for their type of business and scale of business. Generally due to lack of knowledge, they opt for a less suitable type of entity and later it creates more problems for them. In order to sort out this issue, we have already done our extensive research on Private limited company VS LLP.
So, now you concentrate on your business operations and let us take care of your compliances and regulatory requirements.
Basics
In a nut shell, if you are into a small or mid-size business and you don’t seek any funding, you should preferably opt for an LLP.
Both LLPs and Private limited companies are to be registered with the ministry of corporate affairs. And both has almost similar process for registration.
Difference Between Private Limited Company VS LLP
| Basis | LLP | Private Limited company |
| Number of members | Min – 2, Max – no cap | Min – 2, Max – 200 |
| Taxes |
|
|
| Capital Contribution | Not specified | Private company should have a minimum paid up capital of Rs. 1 lakh |
| Personal Liability | Limited to the extent of the contribution to the LLP | Limited to the extent of the unpaid capital |
| Foreign Nationals as shareholder / Partner | A foreign national can be a partner | A foreign national can be a shareholder |
| Meetings | No such requirement | 4 Board of directors meetings a year and an annual general meeting is compulsory |
| Annual Returns | Annual statement of accounts and solvency & Annual Return has to be filed with ROC. | Annual Accounts and Annual Return to be filed with ROC. |
| Audit | Required only in case contribution is above 25L or if annual turnover is above 40L | Compulsory |
| Dissolution | Less procedural | Very procedural |
| Venture capitalists preference | Low | High |
| Credibility | Low | High due to strict compliance |
| Conversion | Cannot be converted to a private limited company | Can be converted to an LLP |
| Cost of registration | Low | High |
| Annual ROC cost | Low | High |
| Esops | Not possible | Possible |
Conclusion
Advertisement
Private limited companies are well established in India, and has a wide spread recognition, whereas LLP being a relatively new concept in India, Investors prefer investing in Companies rather than LLPs.
Now in case you are looking to raise fund or offer ESOPs to your employees, private limited company is the way to go. In case you don’t have any such requirement you should probably go for an LLP. However, do take some time to think over it, as if you get an LLP registered you need to get all other registrations done on its name. And in future you think to switch from an LLP to a Company, considerable efforts would be required.
Once you decide upon your nature of business, you can approach us for any sort of compliance requirement.
- Author – Nihal Jain
- Mobile no – 8861107514
- Email: ca.nihaljain@outlook.com
Recommended
- Difference between trading account and demat account
- Difference Between Pre Incorporation Contracts & Provisional Contracts
- Difference Between Convertible and Non Convertible Debentures
- Difference between Public & Private Companies, Pvt Ltd and Public Ltd
- Procedure to incorporate LLP, Step by Step Guide for Formation of LLP