Comparison among PVT, Public and LLP on different parameter

  • July 13, 2016
  • Dushyant Sharma
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Selecting a business entity is a very difficult decision taken by the entrepreneur in the first stage of the business. There are different forms of business entities. When an entrepreneur starts a new business he/she needs to make a decision that which of the business will be best for him/her. 

 

A person can make a well-informed decision only when he has complete knowledge about all the forms of business. He can do business either in the form of a firm where he has unlimited liability or he can choose to do business in the form of a company where his liability is limited. He can start his business in any form. The various forms of business and comparison among those are mention below:-

What is a Private Limited Company?

A private business differs from a public limited company and LLC as it cannot trade its shares among the public, and not sell the shares in open stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). 

 

This point doesn’t mean that privately owned businesses do not have shares or owners. The difference is that these shares are privately owned and traded among a select few investors. Another point is that privately owned businesses run similarly to public organizations. The only difference is the number of shares traded which is a smaller section of public company shares.

 

The private companies own capital from financial investors or venture capitalists, that attract because of high-risk, but also for high-reward opportunities. In case, a private company needs more capital to grow, it can go public through an initial public offering (IPO) and issue shares to the public. Difference between LLP and Private Limited Company.

Features of Private Limited Company

  • A private limited company must have a minimum paid-up share capital.
  • It cannot transfer shares through its Articles of Association (AOA).
  • The maximum number of members is 200.
  • It cannot issue public invitations for subscribing to its securities.

What is a Public Limited Company?

In a public limited company, the owners and managers have limited liabilities this means at the time of bankruptcy the partners do not have to pay beyond their shares. But as compared to LLP, setting up a public limited company is more complicated. To obtain a certificate of incorporation for a Public Limited Company, a minimum of three directors and seven shareholders or members.

The public company can sell its shares in the share market to raise capital. Similarly, it can issue secured and unsecured debentures and raise capital by offering its shares to the public.

To set up a company, registration with the Registrar of the Companies (RoC) under the Companies Act, 2013 is mandatory for a Public Limited Company. Strict regulations and norms must follow as compared to other types of companies or partnerships.

Features of Public Limited Company

  • Must have a minimum of 7 shareholders and 3 Directors to form a public limited company.
  • A minimum authorised share capital of Rs. 1 lakh.
  • The directors must have a digital signature certificate (DSC) and shareholders must have a DIN.
  • The Memorandum of Association (MOA), Articles of Association (AOA) and duly filled Form DIR - 12.
  • Prescribed payment of registration fees must pay to the ROC.

What is a Limited Liability Partnership?

An LLP has become a popular form of organization for entrepreneurs in India, because of its limited liability feature. You get the benefit of a partnership and a public limited company. This must have a minimum of two partners who enter into an LLP agreement and these partners will have limited liability.

 

The LLP was introduced in India in 2008, and it is regulated by the Limited Liability Partnership Act of 2008. Among the partners, a minimum of two designated partners must be natural persons, with at least one of them being a resident of India. The LLP agreement governs the rights and duties of designated partners, who are directly responsible for complying with all provisions of the LLP Act, 2008 and the provisions specified in the LLP agreement.

Features of LLP 

  • LLP has a separate legal entity.
  • A minimum of two people can form an LLP and no limit on maximum numbers.
  • There is no upper limit on the maximum number of partners.
  • There must be a minimum of two designated partners.
  • At least one designated partner must be a resident of India.
  • The liability of partners is limited according to the capital contribution made by the partner.
  • The cost of forming an LLP is low.
  • Less compliance and regulations.
  • No requirement for minimum capital contribution.

Difference Between LLP, Private & Public Limited Company

Private Limited Company

Public Limited Company 

Limited Liability Partnership (LLP)

Incorporation

Private limited companies register under the Companies Act, of 2013.

Public limited companies register under the Companies Act, of 2013.

LLP registers under the provision of the LLP Act, 2008.

Number of Designated Partners/ Directors

Private limited company you need to have at least two shareholders and two directors.

The public limited company need seven shareholders and three directors. 

Need to have two designated partners to form an LLP.

Transfer of Shares

A private company's right to transfer the shares is a restricted right.

Public company shares are freely transferable.

The right to transfer the share is governed by the provisions of the LLP agreement.

Annual Filing

Annual financial statements and annual returns must file to the registrar of companies.

Must file the annual filing to the registrar of companies.

Annual statements of accounts and solvency and annual returns must file to the registrar of companies every year.

Funds and their Sources

For privately-held organisations, the wellspring of assets is not many private financial backers or investors.

For the public corporation, the source of assets or funds is by selling its bonds and shares.

LLP does not raise funds from the public in any form. The partners contribute capital to the business.

Difference in Naming

The name of the LLP must end with the words LLP as prescribed under the LLP, Act,2008.

In the case of the company, the name of a private company must end with the words private limited 

The name of a public company must end with the word limited.

Conclusion

To conclude, all three companies have their own advantages and disadvantages, people can choose among the three as per their requirements. We at Registrationwala, assist our clients to understand their goals and choose the option which suits them the best. Reach out to us if you are looking for private company registration, public limited company or limited liability partnership registration


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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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