At the time when Entrepreneurs start their new business, there is a typical confusion between which type of business will be best for them. Which will profit them more? Which kind will give the best atmosphere for their business to flourish? What circumstances do they have to consider? Questions like these are common as well as significant too. You have to know the difference between all the kinds. You require to have all the information on what all these companies issue. The advantages and disadvantages. Discussing LLP vs Private Limited company, both give limited liabilities to its partners and individuals. Both are likewise considered to be individual legal entities.
LLP vs Private Limited Company
A Private Limited Company is one of the most recognized kinds of business structure in India. In India, Limited Liability Partnerships are somewhat new as compare to Private Limited Companies. There are some differences as well as likeness between the two. Some of them are the following:
While you should have at least two members, two investors, and two directors for the inclusion of the private limited company and a maximum of fifteen directors and two hundred members is permitted. A limited Liability Partnership requires at least two partners and two designated partners. There is no maximum limit. The cost of the composition of a Limited Liability Partnership less as compared to the Private Limited company.
The difference in naming:
Both forms must be named alternately. For a Private Limited organization, you need to use Privately Limited at the end of the name of the company. And for a Limited Liability Partnership, you have to use a Limited Liability Partnership or LLP at the end of the name of the organization. While there are partners in an LLP, there are individuals in a Private Limited Company.
The difference in the registration process:
Private limited company enrollment is performed as per the Companies Act, 2013, and is enrolled with Registrar of Companies. However, LLP registration is completed as per the Limited Liability Partnership Act, 2008, and is enlisted with Registrar of LLP. A DIN (Director Identification Number) is needed for the enrollment of the Private Limited Company. However, a DPIN (Designated Partner Identification Number) is needed in case of a Limited Liability Partnership. The other rules pursued by both the companies are according to their specific Acts also.
The difference in tax structure:
Private limited companies are responsible to pay tax on the income of the company. There is a dividend distribution tax and an alternate minimum tax too. Still, the tax structure of a Limited Liability Partnership is much easier. There are only two applicable taxes. Firstly income tax and second is an alternate minimum tax.
Different Charter Documents:
While a Private Limited Company has to write an Article of Association and Memorandum of Association, the equivalent does not pursue an LLP. A Limited Liability Partnership has to create an LLP agreement. Despite both, the documents are utilized for the same thing. They contain the working and purposes of the company also with other required details.
As per the Companies Act, the Private Limited Companies must administer board and general meetings on the recommended time. Still, there are no such obligations for a Limited Liability Partnership.
In a Private Limited Company, ab investor can simply exchange his shares with another investor. Yet, in a limited Liability Partnership, such exchanges are administered by the LLP agreement.
Voting rights are chosen in a Private Limited Company based upon the number of shares an investor holds. However, in a Limited Liability partnership voting rights are chosen as described in the LLP agreement.
Compliance and other factors:
A Limited Liability Partnership does not need to review its account if its yearly turnover is not as much as Rupees forty lakhs. Yet, Private Limited Company will have to check its account yearly and also will have to file the same with MCA (Ministry Of Corporate Affairs). Also, both forms give limited liabilities, yet the liability of individuals is limited to shares in Private Limited Company. In an LLP the liability is restricted not only to shares but up to whatever sum has been put resources into the firm in any structure.
On account of Private Limited Company, no provisions are given to the individuals. In a Limited Liability Partnership, in any case, assurance is given to the partners or individuals who give useful information.
The essential rules and regulations of a Private Limited Company are referenced in the Memorandum of Association and Article of Association. In any case, in a Limited liability Partnership, the equivalent is referenced in the LLP agreement. The disintegration in LLP vs Private Limited Company is less procedural when contrasted to a private limited company.