COMPARISON OF PRIVATE LIMITED COMPANY AND LIMITED

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COMPARISON OF PRIVATE COMPANY AND LLP

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	-	Private Company	-	LLP
BUSINESS FORMATION
Incorporation / Registration	-	Incorporated under provisions of Companies Act, 2013	-	Incorporated under provision of LLP Act, 2008
Minimum number of owners	-	2 shareholders required	-	2 Partners required
Minimum Number of Directors / Designated Partners	-	2 Directors required	-	2 Designated Partners required
Maximum number of owners	-	200 is the maximum number of shareholders allowed	-	No such limit. An LLP can have any number of partners
Capital Requirements	-	No Minimum capital requirements	-	No Minimum capital requirements
Cost of Registration	-	Cost of Registration depends on Authorised Capital	-	Less when compared to Company
BENEFITS OF BUSINESS STRUCTURE
Liability of Owners	-	Limited to the unpaid amount of shares taken in the company	-	Limited to the agreed contribution
Duration of Business	-	Continue until winding up under Companies Act.	-	Continue until winding up under LLP Act.
Changes in the ownership	-	Company will continue irrespective of changes in the ownership or management	-	LLP will continue irrespective of changes in the ownership
Ownership of property	-	All assets and liabilities owned by the company	-	All assets and liabilities owned by the LLP
Withdrawal of Capital	-	Once paid up, capital cannot be withdrawn by shareholders without the approval of court. Company can buy back the shares subject to Companies Act.	-	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	-	Interest on capital can be claimed only for infrastructure company etc. and subject to central government permission.	-	LLP can provide interest on capital without any approval subject to LLP Agreement.
Termination of ownership	-	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.	-	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	-	It is not possible to remove a shareholder from the company by others.	-	It is possible to remove a partner from the LLP subject to the LLP agreement.
BUSINESS MANAGEMENT
Directors / Designated Porters	-	A director need not be a shareholder.	-	Designated Partner should be a partner in LLP.
Management	-	Management of Company is vested with Board of Directors elected by shareholders	-	LLP is managed by partners as per LLP agreement. Partners can delegate management power to a management team or single partner
Meetings for Decisions	-	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.	-	No such requirements of meetings. Decision process as per LLP Agreement.
Remuneration	-	Directors can take remuneration. No restriction in Companies Act	-	Working partners can take remuneration subject to LLP agreement
TAXATION
Permanent Account Number (PAN)	-	Company is required to have a separate PAN other than Shareholder or Director	-	LLP is required to have a separate PAN other than partners
Tax Rate	-	Corporate tax is applicable to limited company @ 32.445% on net profit of the company	-	‘Firm’ tax is applicable to LLP @ 30.90% on net profit of the company.
Dividend Distribution Tax (DDT)	-	Profit if distributed as Dividend, it will attract Dividend Distribution Tax (DDT) @16.45%	-	Profit after tax will be credited to partners’ account and it will not be taxable in the hands of partners again.
Tax Filings	-	Required to file Tax returns every year. In case of no business, a ‘NIL’ return is required to be filed.	-	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	-	Accounts to be maintained with all supporting documents	-	Accounts to be maintained with all supporting documents
Audit Requirements	-	Accounts to be Audited by a Chartered Accountant whether the company does any business not.	-	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	-	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.	-	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	-	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.	-	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.