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Which is better as a start-up: LLP or Private Limited Company or Partnership?

September 22, 2017

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
Where audit is not conducted LLP shall include in its SAS, a statement to effect of acknowledgement by partners of their responsibilities.

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!

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nice article
thanks

Such a great and informative post
Thanks



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