Main Differences between Sole Proprietorship & LLP in Indiaby Filing Bazaar Get Online Legal Services
In 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?
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.
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.
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.
Created on Mar 19th 2020 13:20. Viewed 236 times.