Difference Between Private Limited and LLP Company

Private Limited Company and Limited Liability Partnership are having several business structures administered by 2 different acts called Companies Act 2013 and Limited Liability Partnership Act 2008 individually. Both entities i.e. Pvt Ltd and Limited liability Partnership give many related features needed to run a small to large-sized business, while there are several variations also in some aspects.

In this article, we will consider a Difference Between Private Limited and LLP Company from the perspective of an Entrepreneur beginning a new business.

What is the meaning of Pvt Ltd Company and LLP Company?

A Private Limited Company is a company that is personally held for small businesses. The liability of the members of a Private Limited Company is restricted to the number of shares individually held by them. Shares of Private Limited Company cannot be openly traded.
A limited Liability Partnership involves a business where a minimum of two members are needed and there is no limit on the highest number of members. The liability of the members of an LLP is confined.

Private Limited Company vs LLP Quick Comparison Table:

Let's have the closure of Difference Between Private Limited and LLP Company in table format:

Particulars	Pvt Ltd Company	Limited Liability Partnership
Law Applicable	Companies Act 2013	Limited Liability Partnership Act, 2008
Minimum share capital	No requirement for minimum share capital.	No requirement for minimum share capital
Members Needed to start business	Minimum to a maximum of 200	Minimum to Maximum No limit
Directors Needed	Minimum to a maximum of 15	Two designated partners maximum not applicable
Board meeting	Within 120 days of the previous board meeting. Minimum 4 board meetings to be held each year.	Not necessary
Statutory Audit	Mandatory	Not compulsory unless the partner’s contribution exceeds 25 lakhs or annual turnover exceeds 40 lakhs
Annual Filing	Annual statement of accounts & annual return with ROC. These are filed in form AOC 4 and MGT 7.	Annual accounts and annual returns to be filed with RoC. These returns are filed in LLP form 8 and LLP form 11.
Compliance	High	low
Liability	Limited	Limited
Transferability of shares	It can be transferred easily. It can only be restricted by Article of association.	Can be transferred by executing agreement before a notary public
Foreign Direct Investment	Eligible via automatic and government route	Eligible via automatic route
Suitable to which type	Businesses having turnover, entrepreneurs who need external funding.	Startups, Business, trade, manufacturers, etc.
Company Name	Must end with Pvt. Ltd.	Must end with LLP.

This is a quick overview towards Difference Between Private Limited and LLP Company. Now let's look towards the detailed difference between them.

 

Points Of differentiation: Private Limited and LLP Company

The Difference Between Private Limited and LLP Company are:

 

Registration Procedure:

The Private Limited Company Registration process and the LLP Registration process are quite similar with some variations in the documents and forms existing filed for incorporation. 

 

The steps for the formation of a Private Limited Company are

1. Getting DSC for the proposed Directors

 2. Getting DIN Number for the proposed Directors

 3. Looking for name approval from MCA 

4. Registering for Incorporation.

 

LLP registration also has a little different procedure

1. Getting DSC of the proposed Partners

2. Getting DIN Number / Designated Partner Identification Number (DPIN) for the stated Partners

3. Acquiring name approval from MCA with the LLP agreement.

4. Filing for incorporation. 

Both Private Limited Company and LLP are filed with the Ministry of Corporate Affairs and are issued a Certificate of Incorporation.

The processing time for incorporation of a private limited company and LLP are also comparable with both entities receiving on average about 20 days to incorporate.

 

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Registration Cost

The Government fee for the formation of an LLP is significantly less when compared to the Government fee for the formation of a Private Limited Company.

LLPs have been chosen to meet the requirements of small businesses. Therefore LLP appreciates more moderate government fees for Incorporation. Also, the number of documents that have to be published on Non-Judicial Stamp Paper and Notarized is minor for LLP registration when linked to that of a Private Limited Company registration.

Features

Both LLP and pvt ltd company give many of the same features. LLP and Private Limited Company are both different from their business. That's why legal entities have assets and liabilities that are separate from that of the directors and partners.

LLP is different from its owner, a legal entity registered under the LLP Act, 2008. The partners of an LLP are not individually liable for the liabilities of the LLP. Partners have limited liability and are accountable only to the extent of their participation in the LLP.

Private Limited Company is a separate legal entity that is registered under the Companies Act, 2013. The Directors and Shareholders of a Private Limited Company are not individually liable for the responsibilities of the Company. Shareholders have limited liability and are responsible only to the extent of their share capital.

Ownership

Private Limited Company gives more versatility for the directors when it comes to ownership and ownership sharing. The ownership of a Private Limited Company is determined by its shareholding and a private limited company can have up to 200 shareholders. Moreover, since the shareholders do not directly participate in the management of the company. There is a clear difference in a private limited company among the owners of share and the management. Hence, a private limited company is advantageous when it comes to ownership and management features.

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In an LLP, there is not a clear distinction between the owners and management. In an LLP, the LLP Partners hold ownership of the LLP and also hold powers to manage the LLP. Therefore, a Partner in an LLP will be both an owner and a manager. Whereas, in a pvt Ltd company, the shareholders (owners) do not necessarily have to have management powers holdings. A private limited company is suggested for any business that is considering FDI / Employee Stock Options/Equity funding /Venture Capital funding.

Compliance

Tax compliances are related to both private limited companies and LLP. But, when it occurs to compliance relating to the Ministry of Corporate Affairs, LLP holds significant benefits. An LLP does not have to have its accounts audited if the yearly turnover of the LLP is less than Rs. 40 lakhs and the capital addition is less than Rs. 25 lakhs. A private limited company on the other hand will have to file audited financial statements with the Ministry of Corporate Affairs every year.

The taxation arrangement for LLP is more manageable. LLP is subjected only to Income tax. Once profit is stated and tax is paid by LLP, the distributed income is tax-free in the hands of the partners.

Existence or Survivability

Partnership- The existence of a Partnership business is reliant on the Partners. can be up for dissolution due to the death of a Partner.

LLP- The existence of an LLP is not reliant on the Partners. It can be dissolved only intentionally or by an Order of the Company Law Board.

Private Limited Company- The existence of a Private Limited Company is not reliant on the Directors or Shareholders. It can be dissolved only intentionally or by Regulatory Authorities.

Conclusion

Private Limited Company and LLP Registration have a lot of similarities yet they both are diverse in many of its features and structures. If you are a business person who requires outside funding and is aiming towards a big turnover, a Private Limited Company is a comprehensive business structure for you. While in case you are more than one person who wants to begin the business together with limited liability than an LLP is for you.

Legalpillers help all kinds of Company Registration. If you are looking for online company registration, connect with us today!

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