Difference between LLP and Sole Proprietorship
Limited liability and Sole Proprietorship are the two different aspects of business .Before starting any business an entrepreneur should keep in mind what should he/she prefer so that his/her business grow positively.
Here are some points which help you to define difference between LLP and Sole Proprietorship
Limited liability partnership is a business entity in which partners have limited liability and have a separate legal entity.LLP also provides the flexibility of internal structure .Any misconduct in the business is not the responsibility of one person .
Minimum 2 members are compulsory and Maximum 20 members can be there.
Sole Proprietorship, only one person can be the member and it does not have a separate legal entity. There is no legal distinction between business and the Owner. Owner is responsible for all losses and profits.
Choice of Name
In LLP promoters can provide the name and get it approved by the Registrar of the Company. Approval is given to only those name which are non-objectionable.
Sole Proprietorship names can be chosen by promoters .No approval is needed regarding usage of the name. But it is preferred to avoid trademark names.
LLP has to be registered with Registrar of Company and Certificate of Incorporate has to be issued.
Sole Proprietorship, there is no need of Registration. A sole proprietorship does not require any formality which is there in the LLP. Business can be opened whenever owner wants.Sole proprietorship requires less paperwork.
In LLP foreign nationals can take part in a partnership which follows RBI guidelines. In these, at least 1 member has to be Indian Resident.
In Sole Proprietorship there are no such made regarding participation .
LLP was passed under partnership act 2008 which contains all the rules and regulations.
In Sole Proprietorship needs no act has been passed.
LLPs tax rates are charged 30 % in addition to the service charge.
In Sole Proprietorship tax slabs are applicable according to the personal income.
Control and liability
LLP is organized in according to the state laws. LLPs have control over business management in partnership.Task and obligations are divided based on the partnership agreement. The agreement includes the division of costs and profits. this type of business entity helps shield the owners' personal assets from attachment to satisfy debts of the business.
In Sole proprietor person has complete management control over business.
In LLP firm is audited if there is a contribution of 25,00,000 and turnover crosses 40,00,000
In Sole Proprietorship, an audit is not applicable.
In LLP business partners frame their business idea and then apply all the formalities required for DSC-Digital Signature Certificate, DIN-Director Identification Number, Consent letter and subscription letter.
These formalities are not required Sole Proprietorship Business.