A Private Limited Company and Limited Liability Partnership (LLP) have different features and entrepreneurs chose the business structure suiting their needs and other aspects.
It is good to compare Private Limited Company and LLP for entrepreneurs keen to start a new venture.
A Private Limited Company or famously known as LTD is a privately held Company. Whereas LLP, which is limited liability partnership, is a company where all partners have limited liabilities. Here, one partner is not responsible for other partners’ diligence or negligence.
In both the Companies, the minimum requirement of 2 Partners is mandatory
- Registration – Process and Cost
The registration process for Private Limited Company and LLP is similar and are registered with the Ministry of Corporate Affairs. However, the registration cost for LLP is significantly cheaper than the cost of incorporation of Private Limited Company.
In a Private Limited Company, the liability of shareholders is limited to their shares. Financial risks are a part of business but to be able to minimize them and sustain the business progress is imperative. In an LTD, if due to any reason the company were to be closed the shareholders would not risk losing their personal assets. The liability of partners in LLP is limited to the amount of capital invested and there is no minimum limit to the amount of capital to be invested.
Private Limited Companies are incorporated; hence it continues to exist even if the owner dies. Similarly, the existence and running of LLP does not solely depend on either of the partner. The partners of an LLP may keep changing from time to time and it will not affect the LLP’s continuity.
Private Limited Companies ownership is determined by its shareholding and the number of shareholders allowed is up to 200. However, in an LLP, the Partners hold the ownership of and manage the LLP.
Both Private Limited and LLP offer transferable features, however a Private Limited is more flexible to transferring or sharing of ownership.
An LLP enjoys more freedom from rules put down by the Ministry of Corporate Affairs. Private Limited Company has to file financial statements with the Ministry each year, whereas it may not be the case with an LLP if the annual turnover is less than 40 lakhs and capital contribution is less than 25 lakhs.
Despite the aforementioned similarities and differences, a Private Limited Company is a much more popular choice among entrepreneurs. Overall, a Private Limited Company offers better stability and features than an LLP.