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LLP Vs Private Limited Company

Private Limited Company and Limited Liability Partnership (LLP)are two distinct business entities controlled by separate statutes, the Companies Act 2013 and the Limited Liability Partnership Act 2008. Both formations, i.e. Pvt Ltd and Limited Liability Partnership, provide many of the same features needed to manage a small to medium-sized firm, while also differing in some ways. LLP vs Private limited company in India, Difference Between / Comparison of LLP and Private limited company.

 

What do the terms Private Limited Compnay and LLP mean?

A Private Limited Company (PLC) is a privately held corporation for small businesses. A member’s liability in a Private Limited Company is limited to the number of shares that he or she owns. The shares of a Private Limited Company cannot be exchanged publicly. A Limited Liability Partnership (LLP) is a business with a minimum of two members and no upper restriction on the number of members. The members of an LLP have limited liability.

 

A comparison between Limited Liability Partnerships (LLPs) and Private Limited Companies (PLCs).

Which is better, LLP or Pvt. Ltd. Co.? Both types of commercial organisations, the Private Limited Company and the Limited Liability Partnership, have some parallels as well as some distinctions. Let’s go over both of them now for a better understanding:

 

Pvt Ltd and Limited Liability Partnership have certain similarities.

Separate legal entities: They both have their own legal entities. In the eyes of the law, a Private Limited Company or LLP is recognised as a separate entity.

 

Tax benefits (Taxation):

Tax benefits are granted to both types of business formations. Profits would be taxed at a rate of 30 percent for Firm. Taxation on Company is little lower.

 

Limited Liability:

In the case of a Private Limited Company or a Limited Liability Partnership, the partners’ liabilities are limited.

 

Pvt Ltd registration and LLP registration are two different forms of enterprises that must be registered with the Ministry of Corporate Affairs.

 

Benefits of a Private Limited Company and a Limited Liability Partnership

The following are some of the benefits of forming an LLP:

• An LLP is simpler to incorporate and operate, with fewer formalities in the process.
• When compared to a company, it has a lower cost of registration. An LLP is similar to a corporate body that exists apart from its partners.
• A limited liability partnership (LLP) can be formed with any amount of minimum capital.

 

The Benefits of Starting a Company as a Private Limited Company

• The corporation has no minimum capital requirements.
• The members are covered by Limited Liability Insurance.
• It is a legal entity in its own right.
• It is a distinct ‘person’ from the individuals who make it up.

 

Although Pvt. Ltd. Co. and LLP share many similarities, they differ in many of their qualities and structures. A Private Limited Company is the ideal business form for an entrepreneur who requires external capital and wants to achieve a high level of turnover. Limited Responsibility Partnership is for you if you are more than one individual who wants to form a business together with limited liability.

Registration Procedures

Private limited company

• Obtain a Digital Signature Certificate (DSC) for the proposed directors.
• Obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs for the proposed directors’ names (MCA)
• Incorporation Application

 

Limited Liability Partnership LLP

• Proposed Partners’ Digital Signature Certificate (DSC) is obtained
• Get the Designated Partner’s Identification Number (DIN) (DPIN)
• MCA Incorporation Filing Approval of Name

Why LLP is better than Private Limited Company

It is clear that the registration procedures for both Private Limited Companies and LLPs are straightforward. As a result, it is not a question of ease of incorporation; rather, it is a matter of deciding the company’s direction and future. We’ve also found that forming a private limited corporation can be advantageous at times.

• LLPs bring together the operational benefits of a corporation with the flexibility of a partnership firm.
• When compared to forming a private limited company, the cost of forming an LLP is quite low.
• An LLP’s compliance obligations are much less stringent than those of a private limited corporation. If an LLP hasn’t reached the thresholds of 40 lakh turnover or 25 lakh revenue contribution, mandated audits aren’t required.
• A private limited corporation has a limited number of shareholders and can only have a maximum of 200 stockholders. LLPs, on the other hand, are not subject to such restrictions.
• Meeting requirements for PLCs are significantly higher, with four board meetings and one annual general meeting required.
• Meetings are not required in a limited liability partnership.
• The cost of forming and keeping a PLC (Rs. 15000 incorporation + Rs. 15000 compliances + Rs. 15000 audit) is three times that of forming and maintaining an LLP (Rs. 11,000 incorporation + Rs. 4,000 compliances). As a result, LLP is a cost-effective option.
• Adopting the PLC model could be costly for small business owners. PLCs frequently are unable to pay or fail to fulfil their compliance obligations on time, resulting in fines of up to Rs. 1 lakh in some cases. LLPs, on the other hand, let you to avoid the hassle of fines entirely. The fees for LLP compliance are quite low, and fines are rarely issued. LLP vs Private limited company in India, Difference Between / Comparison of LLP and Private limited company.