Private Limited Company and Limited Liability Partnership are two different business structures governed by two different acts: Companies Act 2013 and Limited Liability Partnership Act 2008. Both entities i.e. Pvt Ltd and Limited Liability Partnership offer many similar features required to run a small to large-sized business, while there are many differences also in some aspects. In this article, we will discuss the comparison of Pvt Ltd. vs LLP from the viewpoint of an Entrepreneur starting a new business.
What is the meaning of Pvt Ltd and LLP?
A Private Limited Company is a company that is privately held for small businesses. The liability of a Private Limited Company members is limited to the number of shares held by them. Shares of Private Limited Company cannot be publicly traded.
A Limited Liability Partnership (LLP) means a business where a minimum of two members are required and there is no limit on the maximum number of members. The liability of the members of an LLP is limited. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible for another partner's misconduct or negligence.
Similarities Between Pvt Ltd and Limited Liability Partnership Separate legal entity:
Both of them have a separate legal entity. That means Private Limited Company or LLP is treated as a different individual in the eyes of law.
Benefits on taxes (taxation): To both types of business structures tax benefits are given. The tax benefits would be 30% of the profits.
Limited Liability: In case of Private Limited Company and LLP, the liabilities of the partners would be limited.
Registration Process: Pvt Ltd registration and LLP registration, Both types of businesses are required to be registered with the Ministry of Corporate Affairs.
The advantages of registering a business as an LLP
An LLP is easier to start and manage and the process has fewer formalities
It has a lesser cost of registration as compared to a Company
LLP is like a corporate body having its existence other than its partners
LLP can be started with any amount of minimum capital
The advantages of registering Business as a Private Limited Company
There is No Minimum Capital Requirement in the company
The members have Limited Liability
It is a Separate Legal entity
It is a different ‘person’ from the members who compose it
Pvt. Ltd. Co. and LLP have a lot of similarities yet they both are different in many of its characteristics and structures. If you are an entrepreneur who needs external funding and are aiming towards good turnover, a Private Limited Company is a perfect business structure for you.. While in case you are more than one person who wishes to start the business together with limited liability than Limited Liability Partnership is for you.
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