Limited liability partnership Vs Private limited companyby Sowmiya Narayanan Business Consultant
General View of Limited liability partnership and Private Limited company:
Private Limited company:
A Private limited company is a voluntary association of not less than two and not more than two hundred members, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures.
Features of Private Limited Company:
- Independent legal existence.
- A Private Limited company need not have more than two directors
and two shareholders.
- Liability of its members is limited.
- Shares allotted are not freely
transferable between members.
- Enjoys continuity of
- The transfer of shares could be restricted by the Articles of
Association, thereby avoiding any undesirable persons to become shareholders of
LLP is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
Features of LLP :
- The LLP has a separate single entity.
- Minimum two partners are required.
- No requirement for minimum capital
- The mutual rights and duties of LLP
and its partners shall be governed by LLP agreement between
the partners or between LLP and its partners.
- Provision for Firms/ Private Limited
Companies/ Unlisted Companies to convert into LLP’s.
Benefits of Limited Liability partnership over private limited company:
1. Owner of Business:
LLP requires minimum 2 partners. There is no limit on maximum partners unlike a private limited company wherein there is a restriction of not having more than 200 members.
2. No requirement of minimum contribution:
3. Lower cost of Formation:
Minimum Statutory Fee for incorporation of Private Company is Rs. 6000/- and Minimum Statutory fee for Public Limited company is Rs. 19000/-
Minimum Statutory fee for incorporation of LLP is Rs. 1500/- and Maximum fee for incorporation of LLP is Rs. 7000/- (approx.)
4. Lower compliance burden resulting in savings:
5. No requirement of compulsory Audit:
All the companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement. As per the provisions of LLP act, accounts to be audited annually except for LLP’s having turnover less than Rs. 40 lacs or Rs. 25 lacs contribution in any financial year.
6. Taxation Aspect on LLP:
Section 40(b): Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction in the hands of Limited Liability Partnership.
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