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Comparison of Private Limited Company and Limited Liability Partnership (LLP) on the parameters:
Business Formation
Benefits of Business Structure
Business Management
Taxation
Accounts and Audit, Records and Legal Compliance
Criteria
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Private Company
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LLP
BUSINESS FORMATION
Incorporation / Registration
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Incorporated under provisions of Companies Act, 2013
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Incorporated under provision of LLP Act, 2008
Minimum number of owners
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2 shareholders required
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2 Partners required
Minimum Number of Directors / Designated Partners
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2 Directors required
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2 Designated Partners required
Maximum number of owners
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200 is the maximum number of shareholders allowed
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No such limit. An LLP can have any number of partners
Capital Requirements
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No Minimum capital requirements
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No Minimum capital requirements
Cost of Registration
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Cost of Registration depends on Authorised Capital
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Less when compared to Company
BENEFITS OF BUSINESS STRUCTURE
Liability of Owners
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Limited to the unpaid amount of shares taken in the company
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Limited to the agreed contribution
Duration of Business
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Continue until winding up under Companies Act.
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Continue until winding up under LLP Act.
Changes in the ownership
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Company will continue irrespective of changes in the ownership or management
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LLP will continue irrespective of changes in the ownership
Ownership of property
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All assets and liabilities owned by the company
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All assets and liabilities owned by the LLP
Withdrawal of Capital
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Once paid up, capital cannot be withdrawn by shareholders without the approval of court. Company can buy back the shares subject to Companies Act.
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Partners can withdraw capital subject to LLP agreement. It is also possible for a partner to reduce contribution liability after giving notice to creditors
Interest on capital
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Interest on capital can be claimed only for infrastructure company etc. and subject to central government permission.
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LLP can provide interest on capital without any approval subject to LLP Agreement.
Termination of ownership
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A shareholder (member) can terminate membership by transferring the shares in his name to any person subject to conditions in Articles of the company. A shareholder cannot resign from the company.
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A partner continues as a partner in the LLP even after transferring all his rights in the LLP unless LLP agreement provides otherwise. A partner can even resign from the LLP.
Removal from the ownership
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It is not possible to remove a shareholder from the company by others.
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It is possible to remove a partner from the LLP subject to the LLP agreement.
BUSINESS MANAGEMENT
Directors / Designated Porters
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A director need not be a shareholder.
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Designated Partner should be a partner in LLP.
Management
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Management of Company is vested with Board of Directors elected by shareholders
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LLP is managed by partners as per LLP agreement. Partners can delegate management power to a management team or single partner
Meetings for Decisions
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Operational decisions are taken at Directors meeting and directors are required to meet once in every quarter and General meeting of shareholders to be conducted once in a year mandatorily.
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No such requirements of meetings. Decision process as per LLP Agreement.
Remuneration
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Directors can take remuneration. No restriction in Companies Act
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Working partners can take remuneration subject to LLP agreement
TAXATION
Permanent Account Number (PAN)
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Company is required to have a separate PAN other than Shareholder or Director
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LLP is required to have a separate PAN other than partners
Tax Rate
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Corporate tax is applicable to limited company @ 32.445% on net profit of the company
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‘Firm’ tax is applicable to LLP @ 30.90% on net profit of the company.
Dividend Distribution Tax (DDT)
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Profit if distributed as Dividend, it will attract Dividend Distribution Tax (DDT) @16.45%
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Profit after tax will be credited to partners’ account and it will not be taxable in the hands of partners again.
Tax Filings
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Required to file Tax returns every year. In case of no business, a ‘NIL’ return is required to be filed.
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Required to file Tax returns every year. In case of no business, a ‘NIL’ return is required to be filed.
ACCOUNTS, AUDIT, RECORDS AND LEGAL COMPLIANCES
Accounts
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Accounts to be maintained with all supporting documents
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Accounts to be maintained with all supporting documents
Audit Requirements
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Accounts to be Audited by a Chartered Accountant whether the company does any business not.
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Accounts to be Audited by a Chartered Accountant only if the turnover exceeds Rs.40 Lakhs or contribution exceeds Rs.25 Lakhs.
Registers and Records
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Limited Company is required to maintain lot of Registers, Records and to keep Minutes of Board Meetings and General Meetings from time to time irrespective of doing business or not.
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LLP is not required to maintain any Registers, Records and Minutes unless specifically mandated by LLP agreement. Partners are at liberty decide the requirements.
Annual and Event based Filings
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Company is required to file certain statutory returns annually and other filings based on certain events from time to time irrespective of doing business or not.
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LLP is required to file certain statutory returns annually and other filings based on certain events from time to time irrespective of doing business or not.