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Differentiate Between LLP and Private Limited Company Registration

Private Limited Company Registration

Do you want to start your business but need clarification about the right business structure? There are various structures for entrepreneurs available to establish a successful business. In India, the most common business structures are LLP, i.e. Limited Liability Partnership and Private Limited Company Registration. These are the most popular business structures among the entrepreneurs. But sometimes, you may need clarification on which one is better for you. Here in this blog we will compare LLP and a Pvt Ltd Company Registration.

But before moving towards the comparison, let’s talk about the LLP and Private Limited Registration.

What do you mean by LLP and Private Limited Company Registration?

A Private limited company has been held privately, especially for small businesses. Liability of the members of a private company is limited to the shares they hold. The general public can’t trade the shares of a Pvt Ltd Registration on the stock exchange. The company is a separate legal entity.

LLP, i.e., a Limited Liability Partnership, was introduced in 2008 in India. This business structure offers the benefits of both private limited and partnership firms. All the partners of an LLP have limited liability up to the contributions they make. It is a separate legal entity from its partners.

Quick Comparison between LLP and Private Limited Company Registration

Features  Private Limited Company LLP
Applicable Law Companies Act, 2013 Limited Liability Partnership Act, 2008
Form Used for Registration SPICe Plus Form FiLLiP Form
Minimum Share Capital No minimum share capital required No minimum share capital required
Number of Directors/ Designated Partners Minimum: 2

Maximum: 15

 Minimum: 2

Maximum: No Limit
Number of Members Minimum: 2

Maximum: 200

 Minimum: 2

Maximum: No Limit
Identification Number DIN i.e. Director Identification Number DPIN i.e. Designated Partner Identification Number
Board Meeting Minimum 4 board meetings and gap between two meetings is not more than 120 days No Need
Statutory Audits Mandatory  No need unless partner’s contribution exceeds Rs. 25 Lakhs and turnover exceeds 40 Lakhs
Registration Charges Depends on authorized capital and stamp duty of the state Less as compare to Private Limited Registration Charges
Name of Company  Should end with “Pvt. Ltd.” Should end with “LLP”
Dividend Distribution Tax Applicable  Not Applicable
Legal Compliances Lengthy and Complex Less and Simple
Annual Return Filing Annual financial statements and annual return with ROC (Registrar of Companies) in Form AOC 4 and Form MGT 7 Statement of account and solvency and annual returns with ROC (Registrar of Companies) in Form 8 LLP and Form 11 LLP
Tax Structure Complicated  Comparatively simpler
Liability  Limited to the capital contribution Limited to the agreed contribution
Legal Entity Separate Legal Entity Separate Legal Entity
Tax Benefit 30% 30%
Existence  Continuous Continuous
Foreign Direct Investment (FDI) Eligible via automatic and Government route Eligible via automatic route

Understand the Difference between LLP and Private Limited Company Registration

If entrepreneurs understand the LLP and Private Limited Company Registration in India and which one is better, it will help them choose the appropriate business structure to commence their entrepreneurial journey. Here, in this section of the blog, we will discuss the differences in detail.

LLP vs. Private Limited Company Registration Process

  • LLP has been registered with MCA, i.e., the Ministry of Corporate Affairs, under the Limited Liability Partnership Act, 2008. On the other hand, a private limited registration is done with MCA, i.e., the Ministry of Corporate Affairs, under the Companies Act of 2013.
  • During LLP registration, you have to obtain the DPIN, i.e., the Designated Partner Identification Number, for all the designated partners of the company. Whereas, to register Pvt Ltd online, you have to acquire the DIN i.e. Director Identification Number, for all the directors of the company.
  • The important governing document required for an LLP registration is the LLP Agreement that has been entered between the partners. The general public can’t obtain this agreement. While for a Pvt Ltd Registration the important governing documents are AOA (Article of Association) and MOA (Memorandum of Association). The general public can obtain these documents by paying the requisite fees to MCA.
  • For an LLP, i.e. Limited Liability Partnership, the registration has been done by filing FiLLiP Form on the portal of the MCA, i.e. Ministry of Corporate Affairs. Whereas for the online Private Limited Company Registration, you have to apply with the help of SPICe Plus Form via the portal of the MCA.

Private Limited Company vs. LLP Members and Director

  • For LLP registration, there is a requirement of a minimum of 2 designated partners. However, there is no maximum limit of the number of partners and members. On the other hand we can see that for Pvt Ltd Company Registration in India, the minimum number of 2 members has been required and can be up to 200 members. Pvt limited company also required a minimum number of 2 and a maximum of 15 directors.

LLP vs. Private Limited Company Legal Compliances

  • There is no need to conduct board meetings or AGM, i.e., Annual General Meetings for LLP as owners manage the business. While for Pvt Ltd Registration online, it is compulsory to conduct at least 4 board meetings every year and an AGM, i.e. Annual General Meeting within six months of the end of the financial year. 
  • It is optional for the LLP to conduct statutory audits unless its annual turnover exceeds Rs. 40 Lakhs and the capital contribution exceeds Rs. 25 Lakhs. However, it is mandatory for a Pvt Ltd Registration to conduct a statutory audit, regardless of its turnover and capital contribution.
  • LLP have to file the statement of account and solvency and annual returns with ROC i.e. Registrar of Companies in Form 8 LLP and Form 11 LLP. However, after the registration of a Private Limited Company, you must have to file the annual financial statements and annual return with ROC i.e. Registrar of Companies via Form AOC 4 and Form MGT 7. 

Private Limited Company vs. LLP Company Name

  • It is mandatory to add the word “LLP” at the end of the name of an LLP Company. Whereas for a Private Limited Registration, it is compulsory to add word “Pvt Ltd” at the end of the name of a private company.

LLP vs. Private Limited Company Taxation System

  • Tax structure of Private Limited Company is complicated. Its taxation system includes the dividend distribution tax. Whereas, the tax structure of an LLP is simple as compare to that of Pvt Ltd Company. Taxation system of an LLP does not include the dividend distribution tax. 

Benefits of LLP and Private Limited Company Registration

Let’s have a look on benefits of LLP Registration and a Pvt Ltd Registration respectively–

Benefits of LLP Registration

  • An LLP has a separate legal entity from its partners. It can have its assets, enter into contracts, and enhance credibility.
  • The partners of an LLP are only responsible for what they work in. Each partner is only responsible for their own actions and debts, not for the activities of other partners.
  • Charges for LLP registration are comparatively less than that of other registrations. It has the lower compliance burden during the year as per Limited Liability Partnership Act, 2008.
  • Partners can set the terms of their LLP with the help of a partnership agreement that includes roles, responsibilities, and profit-sharing arrangements.
  • As compared to the other registrations, LLPs have fewer regulatory compliance requirements. Hence, it becomes easier and less expensive to manage an LLP.
  • Registration of an LLP provides certain legal protections to the organization and its members. It also helps in resolving disputes and conflicts within the organization.

Benefits of Private Limited Company Registration

  • A Pvt Ltd registration offers the limited liability to the shareholders to the amount that they have invested in the company. Personal assets of the shareholders are not at stake at the time of business debts.
  • Pvt Ltd Company has been considered as a separate legal entity different from its shareholders. It provides legal protection that helps in securing funds and engaging in contracts efficiently.
  • Private Limited Registration in India usually has a higher credibility and trust in the business world as compared to the other unregistered entities. It will help in dealing with customers, suppliers, or investors.
  • Compared to the LLP and other business structures, a private limited company can enjoy the lower tax rate. And various subsidies and exemptions have also been introduced by the Government.
  • You can transfer the ownership of a Private Limited company quickly by selling or transferring the shares. It will facilitate the easy transition of the ownership without disrupting the operations of the company.
  • Pvt Ltd Company Registration online can provide the legal protection for your business name and brand. It will also prevent others from using a similar name that can confuse the customers.

Final Words

Both LLP and Pvt Ltd Registration have its own set of advantages and disadvantages. Although both business structures have a lot of similarities but they are different from each other in many aspects. In this blog, we have compare the LLP and Private Limited Company Registration in details. If, as an entrepreneur, you are confused about choosing the right structure among LLP and Private Limited Company for your business don’t worry! This comprehensive guide provides you the valuable insights and a detailed comparison between them

If you still have any queries, you can seek the expert assistance of professionals like Legal Pillers. We have a dedicated team of professionals with expertise in different business structures. We will help you choose among an LLP and Private Limited Company Registration in India as per your business goals. So, what are you waiting for? Choose Legal Pillers as your trusted partner and take the first step towards your successful entrepreneurial journey.

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