PRIVATE LIMITED COMPANY vs LLP

In terms of safeguarding the personal assets from financial losses occurred during course of business, Private limited company and LLP are the best options. The following post enumerates the concept in detail.

Any business owner shall think of continuity of business irrespective of the members joining or leaving the entity. The status of the entity should remain same in case of death or insolvency or bankruptcy of any member so that the interest of other members are safeguarded. Hence, Private limited company and LLP can be treated as best option that any business owner can choose.

WHAT IS A PRIVATE LIMITED COMPANY?

It is a form of business entity where the shares are held privately.  The shares of a private limited company CANNOT be traded in public. The liability of each member is restricted to the capital contributed.

WHAT IS A LIMITED LIABILITY PARTNERSHIP?

A business entity in which the partners liability is restricted to the capital contribution by them.

Let us understand various concepts under Private limited company and Limited Liability Partnership.

	PRIVATE LIMITED COMPANY	LLP
Existence	Separate Legal Entity	Separate Legal Entity
Governed by	Companies Act,2013	Limited Liability Partnership Act,2008
Members are called as	Share holders	Partners
Underlying documents and certificates	Certificate of Incorporation, Memorandum of Association (MOA) and Article sof Association (AOA)	Certificate of Incorporation and LLP agreement.
Liability of members	Restricted to share capital	Restricted to share capital
Minimum number of members	2	2
Maximum number of members	200	No limit
Minimum Capital requirement	Rs.1,00,000	No such requirement
Public deposits	CANNOT raise from public	Minimum number of members
Acts binding on members	Shareholders are NOT binding for the acts done by other shareholders	Partners are severally and jointly liable for actions of other partners
Audit requirements	Every company shall get the books audited irrespective of the share capital	Audit is mandatory if Turnover exceeds Rs.40,00,00  OR Share Capital exceeds Rs.25,00,000
Rate of income Tax	22%* +applicable surcharge and Cess	30% +applicable surcharge and Cess
Administered by	ROC	ROC
Changes can be incorporated through	Filing respective forms with ROC	Amending the partnership agreement and filing the agreement with ROC

Process for Incorporating a Private Limited Company:

Requirements:

1) Digital Signature Certificates of all directors

2) DIN of all directors

3) Proposed name of company (shall be unique)

4) Registered Office address

5) Certification of Professionals

6) Share capital and contribution share by all members

7) Description of business

8) Details and KYC of all members

An application shall be made ROC with all requisite documents and information in SPICE forms which are available at www.mca.gov.in. The process shall take minimum 15 days. ROC may send for further re-submissions in case of any ambiguity. Registration charges shall be paid to Government after uploading the forms every time. Amount of challan depends on type of form. 

There are certain other compliance in respect to private limited companies which makes the maintenance of private limited company costlier. It is the responsibility of directors to file the forms as mandated by Government from time to time. However, Private limited company is preferred by angel investors or seed fundings 

Process of Registering a Limited Liability Partnership:

Requirements:

1) Digital Signature Certificates of all directors

2) DIN of all directors

3) Application for name approval

4) Executing an LLP agreement

5) Filing ROC forms

Any change in constitution of LLP shall be amended through LLP agreement and filing the required ROC form. Every LLP shall file 2 forms annually Form 8 and Form 11 within respective due dates. However, Penalties for late filing the forms is pretty high compared to penalties levied for a private limited company.

 

Points to be noted:

1) Digital signature certificate is mandatory for all the directors and partners and can be used in case of certifications. It is valid for a period of 2 years.

2) All the forms that have been uploaded to ROC can be downloaded and are available to public. We can download them by paying Rs.100.