An entrepreneur planning a start-up usually have a common question : which is better for a start-up? LLP, Private Limited Company or partnership firm? So here’s a comparison chart to make it easier for you to decide the same for yourself.
|
Particular |
Limited Liability Partnership (LLP) |
Company (Private) |
Partnership firm |
|
Whether Registration is mandatory |
Yes, under LLP Act, 2008 |
Yes, under Companies Act, 2013 |
Not mandatory, but is advisable to be registered, under the Partnership Act, 1932 with Registrar of Firms |
|
Whether has a distinct identity |
Yes |
Yes |
No |
|
Basic Requirements |
Should contain “LLP” as its suffix |
Should contain “Private” in the name |
Should contain (Registered) in bracket after the name |
|
Perpetual Succession |
Has perpetual succession |
Has perpetual succession |
Does not have perpetual succession |
|
Rights, Duties and Obligation of Partners/Directors are governed by |
LLP Agreement |
Articles of Association and resolution passed by shareholders or directors |
Partnership Deed |
|
Documents required for incorporation/registration |
PAN of partners, Address Proof of Partners, Utility Bill of proposed registered office, NOC from Landlord, Rental Agreement copy between landlord and the proposed LLP |
Scanned copy of PAN, Voters ID/Passport, Scanned copy of latest bank statement/Driving License/Telephone Bill/Mobile Bill/Electricity Bill/Aadhar, Scanned passport sized photograph, scanned copy of latest rental receipt, scanned copy of notarized rental agreement, scanned sale deed/property deed, NOC from landlord |
PAN and voter ID of partners, premises property bill receipt, electricity bill of the premises, rent agreement for rented apartment, NOC from landlord |
|
Incorporation documents open for public inspection? |
Yes |
Yes |
Yes |
|
Can they sue? |
Yes |
Yes |
Yes |
|
Whether foreign participation permitted? |
Yes, but with prior approval of RBI and Foreign Investment Promotion Board |
Yes, permitted under Automatic Approval route in most of the sectors |
No |
|
Minimum and maximum number of members needed |
Minimum 2, no upper limit |
Minimum 2, maximum 200 |
Minimum 2, maximum 10 (for banking business) or 20 (for non-banking business)
|
|
Ownership of assets independent from its members? |
Yes |
Yes |
No |
|
Rights/obligations of partners/director |
Given in LLP Agreement |
Given in AoA, further if amended prior approval of shareholders/directors required |
Given in Partnership Agreement |
|
Extent of liability of members |
Limited to extent of contribution towards LLP |
Limited to the extent required to be paid up on each share |
Partners are jointly and severally liable to the extent of their personal assets |
|
Rate of income tax |
Flat 30% plus surcharge and cess, as applicable |
Flat 30% plus surcharge and cess, as applicable |
Flat 30% plus surcharge and cess, as applicable |
|
Annual Statutory Meetings |
Not required |
Board Meetings and General Meetings to be conducted periodically |
Not required |
|
Annual Filings |
Annual Statement of Accounts & Solvency and Annual Return with the Registrar must be filed each year. Income Tax Return must also be filed for the LLP |
Annual Accounts and Annual Return with the Registrar of Companies must be filed each year. Income Tax Return must also be filed for the Private Limited Company |
Annual Filing with RoC not required, but Income Tax Return to be filed for the firm |
|
Minimum capital requirement |
No minimum capital requirement |
No minimum capital requirement |
No minimum capital requirement |
|
Requirement for Audit |
Audit need not be done if turnover does not exceed 40 lakh and capital contribution of partners does not exceed 25 lakh |
Compulsory compliance |
If profit is less than 8% of its gross profits, then audit is required |
For further queries, please feel free to write me an email at amrita.dasgupta@fundscoop.in
Thank You!