Difference between LLP and Company
Selecting the suitable business structure is the very first step in starting a business. This selection is based on different parameters including business plan, number of partners, investment requirements, foreign investment, area of operation, ability to take risk, etc.
When a layman wants to start business, it is commonly doubtful to choose the most suitable business form for new business entity. There are many business forms which an entrepreneur may choose, but the most commonly chosen business forms are private limited company and LLP. These are the common pillars for an entrepreneur to build his empire. This article discusses the options that an entrepreneur should consider while forming an enterprise.
PRIVATE LIMITED COMPANY: –
Private limited company is a most popular form of business entity. There is no minimum capital requirement, only 2 directors and members are required to incorporate private limited company. It protects members from unlimited liability at the time of loss or closure of company. MCA has implemented changes in registration process and made it easy to incorporate.
SEPARATE LEGAL ENTITIES: – private limited company is treated as an individual in the eyes of law. Company is capable to own funds and other properties in its name.
LIMITED LIABILITY: liability of shareholders in case of private limited company are limited up to the amount of shareholding.
PERPETUAL SUCCESSION: – private limited company has perpetual succession and independent identity, it means co will not lose its identity even after death of its owners or shareholders. Change in shareholding will not affect the company.
EASY FORMATION: – incorporation of private limited company is easier. MCA has implemented changes in registration process.
CAPITAL REQUIREMENT: – no minimum capital is required for incorporation of private limited company, now company can be incorporated with any amount.
LLP is a body corporate formed and incorporated under LLP ACT 2008. LLP is a preferable form of organization as it provides benefits of both the private limited and partnership firm. LLP is a legal entity separated from its partners. All the partners have limited liability up to the contribution made by them and no partner is responsible for the act of another partner. Every partner shall be responsible for their own act.
EASY FORMATION: By having fewer formalities it is easier to start and manage an LLP. Formation of LLP has less legal compliances and requires less time and effort.
MINIMUM CAPITAL REQUIREMENT: – LLP can be incorporated with any amount of capital, there is no minimum capital requirement for the incorporation of LLP.
SEPARATE LEGAL ENTITIES: – LLP is like a corporate body having its existence other than its partners. It has its own existence in the eyes of law.
DIVIDEND DISTRIBUTION TAX: – LLP are not required to pay dividend to its partners so Dividend Distribution Tax is not applicable on LLP.
Comparison of Private Limited Company and Limited Liability Partnership
Difference between LLP and Company can be analysed on parameters such as Business Formation and Legal Status, Business Risk on Personal Assets, Acceptance and Credibility, Attracting Investments, Tax and Legal Compliances, and Start-up advantages, Business Succession etc. etc.
Comparing the advantages and disadvantage of different business structure is very important in selecting the suitable business structure by an entrepreneur.
Different Business Structures
In India, a business can be organized in different forms such as Sole Proprietorship, Partnership, One Person Company (OPC), Limited Liability Partnership (LLP), Private Limited Company. While selecting a business organization, one must have an understanding about the different types of business structures, its merits and demerits, public acceptance and image.
Difference between LLP and Pvt Ltd
Here is the Comparison of Private Limited Company and Limited Liability Partnership (LLP) on the parameters such as Business Formation, Benefits of Business Structure, Business Management, Taxation, Accounts, Audit, Records and Legal Compliances