Learn About the Difference Between LLP and Private Limited Company

limited liability — (source: ezybizindia)

When starting a new business, entrepreneurs often get confused about choosing the right form of business structure. There are different types of business forms, and the most common forms are LLP and Private Limited Company. These two business forms differ from each other in many areas.

However, they have some similarities. This piece thoroughly discusses the difference between LLP and Private Limited Company. Keep reading!

What Is the Difference Between an LLP and a Private Limited Company?

Refer to the table to learn about the difference between Private Limited Company and LLP.

Pointers	Private Limited Company	LLP
Meaning	Private Limited Company refers to a company that is privately held for small businesses.	Limited Liability Partnership refers to a business form that offers the benefits of limited liability of a company and the flexibility of a partnership.
Governed By	The Companies Act, 2013 governs this type of business form.	The Limited Liability Partnership Act, 2008 governs this type of business form.
Number of Members	Minimum - 2, Maximum - 200	Minimum - 2, Maximum - No Cap
Number of Directors	Minimum - 2, Maximum - 15	Minimum designated partner -2, Maximum designated partner - Not applicable
Capital Requirement	No minimum share capital needed	No minimum share capital needed
Abides by	The AoA and MoA of a company	The company’s LLP agreement
Meetings Required	Minimum 4 board meetings needed in a financial year. 1 general meeting of shareholders in a year.	There is no mandate to conduct any meeting in LLP companies.
Tax Structure	Complicated (Company must pay dividend distribution tax)	Easier (This type of business need not pay dividend tax)
Statutory Audit	Required	Required if partners contribution crosses the threshold of ₹ 25 lakh and annual turnover crosses the threshold of ₹ 40 lakh
Reliability	High	Low
Compliances	Higher legal compliances	Lesser legal compliances
Investment	Companies have to follow section 73 and other provisions and rules stated in there	No cap for investment by any third-party
Company Name	Should end with Pvt. Ltd.	Should end with LLP
Foreign Ownership	Must proceed with the approval of Reserve Bank of India and Foreign Investment Promotion Board (FIPB)	Must proceed with the Automatic Approval route

The above-mentioned table focuses on the debate of Limited Liability Partnership (LLP) Vs Private Limited Company (Pvt. Ltd.). Now, let’s learn about the similarities between the two.

What Are Similarities Between LLP and Private Limited Company?

LLP and Private Limited Company have similarities in various pointers. These are as follows:

1. Limited Liability

Both Limited Liability Partnership (LLP) and Private Limited Company (Pvt. Ltd.) have limited liability. In both cases, shareholders and owners are not personally responsible for a company's debt and shares.

2. Separate Legal Identity

Both Limited Liability Partnership (LLP) and Private Limited Company (Pvt. Ltd.) have separate legal entities.

3. Registration Process

LLP and Private Limited Company must register with the Ministry of Corporate Affairs.

4. Perpetual Succession

Both Limited Liability Partnership (LLP) and Private Limited Company (Pvt. Ltd.) have perpetual succession. This means that irrespective of changes of partner, these organisations continue to exist.

Frequently Asked Questions

✓ Is the dissolution process in LLP is different from Private Limited Company?

Yes, the dissolution process is different in LLP and Private Limited Company. In case of LLP, the dissolution is less procedural than a Private Limited Company.

✓ Does an LLP have the same voting rights as a Private Limited Company?

No, an LLP does not have the same voting rights as a Private Limited Company. Private Limited Company decides voting rights based on the number of shares a shareholder holds. On the other hand, LLP decides voting rights as per the LLP agreement.