Confused between LLP or Private limited company?

Are you confused which type of company is good for your business!.. LLP or Private limited? Let us tell you some differentiated features, pros and cons that make both good in their part and then you can decide easily as per your choice and kind of work business you deal in!..

Why LLP?

  1. It is a blend of both partnership as well as private ltd. company.
  2. Decentralized ownership.
  3. Ideal for start-up.
  4. Strictly, Manufacturing units can’t be registered as LLP, due to some basic issued rules of limited liability partnership act, 2008.
  5. Registration is compulsory.
  6. Atleast two persons involved to start a LLP firm and maximum no limit.
  7. MOA and AOA are to be registered with Ministry of corporate affairs.

Now let us discuss some advantages/pros of a LLP firm:-

  • No limits of agreed partner.
  • It do not require compulsory audit (only in maximum limit it may requires).
  • LLP is not liable to pay the tax on the income and share of its partner. Thus, no dividend distribution tax is payable as under section 40(b)
  • DDT is not applicable.
  • Low registration cost
  • LLP can be started on minimum capital (e.g. 5 lac)
  • Less legal compliances.

Disadvantages /cons of LLP:

  • Less shared investments of third party.
  • Less reliable.
  • In case an LLP fails to file Form 8 or Form 11 (LLP Annual Filing), a penalty of Rs.100 per day, per form is applicable.
  • Non-compliance penalty.

Note: An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules, 2014.

Why Private limited company?

  1. Centralized ownership and decentralized management.
  2. Separate legal entity registered under companies act, 2013.
  3. Minimum 2 person required and can extent up to 200.
  4. It requires regular audit.
  5. Company abide by AOA and MOA.
  6. Have right to issue its share.
  7. Perpetuality.

Advantages/Pros of pvt. Ltd. Co.:

  • Reliable.
  • Third party is interested in investing in such companies.
  • High compliance.
  • High investment.
  • More professional
  • Tax reduction.
  • Other benefits.

Disadvantages/Cons of a pvt. Ltd.:

  • Long registration process.
  • Restrict transfer of shares.
  • Cannot issue prospectus to public.
  • Only limited shareholders i.e. 50

I hope you all got a vision which is best for you while setting up your business.

Note- This is as per the Indian system of doing startup and the things you have to keep in mind before registration.

Comment below if you want to know “how to register” your organization legally and approved by government. And how you will get the approval, in how many days you will get your name registered .

Thank you for reading.


1 Comment

  1. Suyash says:

    This is quite detailed and helpful for a new enterprise/ start up
    Help them understand in brief.


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