Main Differences between Sole Proprietorship & LLP in India
by Filing Bazaar Get Online Legal ServicesIn this article, we will tell you about what
is the crucial difference between A Sole proprietorship and Limited Liability
Partnership Firm that will help you to clearly understand what distinguishes
sole proprietorship firm from LLP company registration.
Doing business in India requires you to choose
a type of business entity. In India, you can choose from five different types
of legal entities to conduct business.
These comprise Sole Proprietorship, Limited
Liability Partnership, Partnership Firm, Public Limited Company, and Private
Limited Company. The superior of the business entity depends on various factors
such as taxation, the liability of the property, the burden of compliance,
investment options and exit strategy.
What is the
difference between Sole Proprietorship & LLP in India?
1.
Liability
Sole
Proprietorship:
The Proprietor has an immense responsibility which extends to the amount of
his/her personal estate.
Limited
Liability Partnership:
The partners have a limited liability which extends to the amount of capital
contributed.
Sole
Proprietorship:
There is no separate Act or laws which the governor defines the compliance
requirements.
Limited
Liability Partnership:
Limited Liability Partnership Act, 2008 governs the provisions and compliances
of an LLP, failing which penalties are imposed.
3.
Name
Sole
Proprietorship:
There is the exclusivity of the name. No one can apply for the same name in any
other act.
Limited
Liability Partnership:
There is no exclusivity of the name. Any person can register a sole
proprietorship of the same name with the equal company in a different state.
4.
Tax Computation
Sole
Proprietorship:
A sole proprietorship can use the slab rates while computing their income tax.
Limited
Liability Partnership:
An LLP has to pay flat 30% as income tax on the income generated.
5.
Growth Prospects
Sole
Proprietorship:
A sole proprietorship can only expand if it registers the same individual in
different states
Limited
Liability Partnership:
An LLP can grow by opening branch offices in different countries.
Features of
Sole Proprietorship
Only small traders and merchants should
consider this. The straightforward reason for this, as in the case of the
partnership business is unlimited liability.
Unlimited
Liability:
As an association, an individual company does
not have an independent existence. Therefore, all debts can only recover from
the sole owner. These mean that the owner has full responsibility on all debts.
These are mainly due to discourage any risk-taking, which means that it is
suitable only for small businesses.
Easy to
Start:
Although many people say they want a proprietorship firm
registration online, there is no such thing. There is no
separate registration procedure for proprietorships. All you need is a record
of the relevant government for your business. So if you are selling products
online, a single owner would need a history of sales tax. Therefore, the
start-up as a sole proprietor is relatively easy.
Features of
LLP
The LLP is designed for professional firms and
consulting without the need for equity. It combines some of the best aspects of
the business partnership and Limited Liability Company.
For
Non-Scalable Businesses:
If you run a company that is unlikely to require
equity financing, you can register an LLP as many combined benefits of limited
liability and society in general. It has limited liability as a limited
liability company, and has a more straightforward structure, as a general
partnership.
Number of Partners:
There is no limit to the number of members who
may be in an LLP. So if you are building a large advertising agency, for
example, you do not need to worry about no limit on the number of partners.
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Created on Mar 19th 2020 13:20. Viewed 376 times.