There are many business forms for entrepreneurs to choose from. Two of the most common business forms are Private Limited Company (PLC) and LLP. Let us understand each of these in detail and also take a look at the differences between the two.
What is LLP – Limited Liability Partnership?
A partnership comprising of two or more partners registered with the Ministry of Corporate Affairs under the LLP act, 2008 is known as the Limited Liability Partnership. It is a more preferable form of organization as it provides benefits of private limited and partnership firm. It is a legal entity separated from its partners and all the partners have limited liability up to the contribution made by them and no partner is responsible for the act of another partner.
What is Private Limited Company?
A minimum of two shareholders, who may be individuals or body corporates acting through their representatives, can start the Private Limited registration procedure. Further, the Directors can be same as the shareholders or subscribers to Memorandum of Association as well as Articles of Association (MOA and AOA). Additionally, it protects the members from unlimited liability at the time of loss or closure of company.
A private limited company has all the advantages of a partnership firm like flexibility, greater capital contribution as well as advantages of limited liability, greater stability and legal entity.
LLP v/s PLC
|Limit on owners of business||There is no limit on maximum partners||There is a restriction of not having more than 200 members|
|Minimum Contribution Requirement||There is no minimum capital requirement||Minimum capital requirement of INR 1 Lakh|
|Cost of Formation||Cost of incorporation is approximately INR 8,000||The cost of incorporation varies from INR 6,000 to INR 30,000 depending upon the number of directors, number of members, authorized share capital and member fee|
|Requirement of Audit||Audit is only required if:
||Statutory audit is compulsory|
|Compliance Burden||Only have to file the annual return and a statement of accounts and solvency||Approx 8-10 compliances per annum are required to be made|
Yes it is compulsory for every LLP to file Form3 for LLP Agreement within 30 days of its incorporation.
Any person who is over 18 years of age can be a Director in any Private Limited Company. There are no limitations in terms of citizenship or residency. Therefore, foreign nationals can also be directors in a Private Limited Company incorporated in India.
While the addition of a partner in LLP, the Partner or Designated Partner may contribute the amount agreed by and between all the partners including present in any form whether tangible or intangible. However, it is not mandatory to bring capital to LLP.