Don’t you think there must be some “Better than I thought of” kind of benefits why so many people choose Private Limited Company over so many other types of registrations out there?
When starting any business, one of the preliminary questions raised by an entrepreneur is which kind of entity, a private company incorporated under the Companies Act, 2013 (Companies Act) or a limited liability partnership established under the Limited Liability Partnership Act, 2008 (LLP Act), would be most suitable for his business.
Let us Analyze which one is a More Efficient Vehicle and then decide which structure is best for your business.
Both LLP and Private Limited Company offer many of the same features.
Basis of difference
Private limited company
Limited liability partnership
|Name of Entity||Name to contain ‘Private Limited’ in case of Private Company as a suffix.||Name to contain ‘Limited Liability Partnership’ or ‘LLP’ as a suffix.|
|Cost of Formation||Relatively High||Comparatively lesser than the cost of formation of a Company.|
|Number of Members||2 to 200 members||Minimum 2 partners and there is no limit of a maximum number of partners.|
|Liability of Partners/Members||Generally limited to the amount required to be paid upon each share.||Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner.|
|Statutory Meetings||Board Meetings and General Meetings are required to conducted at the appropriate period and time.||There is no provision in regard to holding any meeting.|
|Maintenance of Minutes||The proceedings of the meeting of the board of directors/shareholders are required to be recorded in minutes.||An LLP by agreement may decide to record the proceedings of meetings of the Partners/Designated Partners.|
|Voting Rights||Voting rights are decided as per the number of shares held by the members.||Decided as per the agreement.|
|Annual Filing||Annual statement of accounts & annual return with ROC. These are filed in form AOC 4 and MGT 7.||Annual accounts and annual returns to be filed with RoC. These returns are filed in LLP form 8 and LLP form 11.|
|Cost of running||High||Comparatively Low|
For Registration of LLP – you can check our latest article – CLICK HERE.
|External Investment – Angels / VC / PE etc.||The best suitable business model for attracting External Investments from Angels / VC / PE||External Investment and even Foreign Direct Investment is Possible. However, attracting Investors to LLP is a difficult task.|
|Employee Stock Options Plans for attracting Employees||Only a Private / Public Limited Company can issue Employee Stock Options Plans for attracting Employees||Not Possible|
So the choice of the business organization depends upon the owner’s need like if one is considering raising funds in India you should register as a company and not LLP. Private companies are considered more credible by investors. However, If you have just started the business and want to run the business at minimal cost, then you should register an LLP. If at any point, you need to switch from an LLP to a private limited company, it can be easily done.
At Udyog Buddy, our team of professionals will help you seamlessly Incorporate your LLP or Private Limited and start your dream business with hand-holding support and affordable price. Apply now and get a Quote for LLP/ Private Limited– https://udyogbuddy.com/contact-page/