Client Name: Ratish Radhakrishnan

Write-up: Comparison between Private Limited Company and Limited

Liability Partnership.

We at Jyothi Prakash & Co have compiled this information to assist the you
in choosing the right constitution of entity for your business model.

BUSINESS FORMATION

Criteria LLP Private Company

Incorporated under
Incorporation / Incorporated under provisions of
provision of LLP Act,
Registration Companies Act, 2013
2008
Minimum number of
2 Partners required 2 shareholders required
owners
Minimum Number of
2 Designated Partners
Directors / Designated 2 Directors required
required
Partners
No such limit. An LLP
Maximum number of 200 is the maximum number of
can have any number of
owners shareholders allowed
partners
No Minimum capital No requirement of Minimum
Capital Requirements
requirements Authorised and paid-up capital
Cost of Registration depends on
Less when compared to
Cost of Registration Authorised Capital and stamp
Company
duty on each state

 BUSINESS STRUCTURE

Office No 16, Sri Krupa Market, Malakpet, Hyderabad – 500036, Telangana,

India
Criteria LLP Private Company
Liability of Limited to the agreed Limited to the unpaid amount of
Owners contribution shares taken in the company
Duration of Continue until winding up under Continue until winding up under
Business LLP Act. Companies Act.
Company will continue irrespective
Changes in the LLP will continue irrespective of
of changes in the ownership or
ownership changes in the ownership
management
Ownership of All assets and liabilities owned All assets and liabilities owned by the
property by the LLP company
A shareholder (member) can
A partner continues as a partner
terminate membership by
in the LLP even after transferring
transferring the shares in his name to
Termination all his rights in the LLP unless
any person subject to conditions in
of ownership LLP agreement provides
Articles of the company. A
otherwise. A partner can even
shareholder cannot resign from the
resign from the LLP.
company.
It is not possible to remove a
It is possible to remove a partner shareholder from the company by
Removal from
from the LLP subject to the LLP others. However, the shares of one
the ownership
agreement. shareholder can be transferred to
another person

 BUSINESS MANAGEMENT

Criteria LLP Private Company

Designated Partner should

Directors / A director need not be a shareholder.
be a partner in LLP.
Designated
Partners
LLP is managed by
partners as per LLP
Management of Company is vested with
agreement. Partners can
Management Board of Directors elected by
delegate management
shareholders
power to a management
team or single partner

Office No 16, Sri Krupa Market, Malakpet, Hyderabad – 500036, Telangana,

India
 In case of a private company, Directors
are required to meet once in every
quarter.
No such requirements of
Meetings for In case of a small company, dormant
meetings. Decision
Management company and a private company (if such
process as per LLP
Decisions private company is a start-up) there
Agreement.
should be at least one meeting of the
Board of Directors in every half of a
calendar year and the gap between the
two meetings is not less than ninety days.
Ownership
No requirements of
Meetings for General meeting of shareholders to be
meetings of Partners of
specific conducted once in a year mandatorily.
LLP.
Decisions
Working partners can take
Directors can take remuneration. No
Remuneration remuneration subject to
restriction in Companies Act
LLP agreement

ACCOUNTS, AUDIT, RECORDS AND LEGAL COMPLIANCES

Criteria LLP Private Company

Accounts to be maintained with
Accounts
all supporting documents
Accounts to be Audited by a
Audit Chartered Accountant only if the
Requirements turnover exceeds Rs.40 Lakhs or
contribution exceeds Rs.25 Lakhs.
LLP is not required to maintain
any Registers, Records and
Registers and Minutes unless specifically
Records mandated by LLP agreement.
Partners are at liberty decide the
requirements.
Annual and LLP is required to file certain
Event based statutory returns annually and
Filings other filings based on certain
events from time to time
Accounts to be maintained with all
supporting documents
Accounts to be Audited by a
Chartered Accountant whether the
company does any business not.
Limited Company is required to
maintain Registers, Records and to
keep Minutes of Board Meetings
and General Meetings from time
to time irrespective of doing
business or not.
Company is required to file certain
statutory returns annually and
other filings based on certain
events from time to time

Office No 16, Sri Krupa Market, Malakpet, Hyderabad – 500036, Telangana,

India
 irrespective of doing business or irrespective of doing business or
not. not.

 TAXATION

Criteria LLP Private Company

Permanent LLP is required to have a
Company is required to have a separate
Account Number separate PAN other than
PAN other than Shareholder or Director
(PAN) partners
LLP is taxable at ‘Firm’ tax at Company is taxable at 25% on net
Tax Rate
30% on net profit of the LLP. profit. In addition to above
The amount of income-tax
and the applicable
The amount of income-tax and the
surcharge, shall be further
applicable surcharge, shall be further
increased by health and
Education Cess increased by health and education cess
education cess calculated at
calculated at the rate of four percent of
the rate of four percent of
such income-tax and surcharge
such income-tax and
surcharge
The amount of income-tax
shall be increased by a The amount of income-tax shall be
surcharge at the rate of 12% increased by a surcharge at the rate of
Surcharge
of such tax, where total 12% of such tax, where total income
income exceeds one crore exceeds one crore rupees.
rupees.
Taxability of
Dividend from a domestic company up
Dividend in the
to ₹10 Lakhs is exempted in the hands
hands of Profit distributed by an LLP
of a Shareholder. Dividend in excess of
Shareholder / is completely exempted in
₹10 Lakhs shall be taxable at 10% in the
Partner the hands of Partner. 
case of a resident
individual/HUF/Firm
 
Tax Filings Required to file Tax returns Required to file Tax returns every year.
every year. In case of no In case of no business, a ‘NIL’ return is
business, a ‘NIL’ return is required to be filed. Delay in tax return
required to be filed. Delay in Filings will attract Penalties and the
tax return Filings will attract Loss can’t be carried forwarded for
Penalties and the Loss can’t setoff

Office No 16, Sri Krupa Market, Malakpet, Hyderabad – 500036, Telangana,

India
 be carried forwarded for
setoff

 STARTUP BUSINSES CRITERIAS

Criteria LLP Private Company

External Investment and even
Best suitable business model
External Investment Foreign Direct Investment is
for attracting External
– Angels / VC / PE Possible. However, attracting
Investments from Angels /
etc. Investors to LLP is a difficult
VC / PE
task.
Private Company can be
Start-up India LLP can be registered under
registered under Start-up India
Registration Start-up India program.
program.
Employee Stock
Only a Private / Public
Options Plans for
Limited Company can issue
attracting Employees Not Possible
Employee Stock Options Plans
for attracting Employees
 

OTHER DIFFERENCES

Criteria LLP Private Company

A Private Limited Company holds a high
Even though an LLP is a separate reputation in the eyes of third parties as
legal entity from its partners, its
compared to LLP. The credibility of
Recognition
reputation is not as high as a Private Limited Companies is also higher
Private Company. in comparison to LLPs due to high
corporate governance that exists in them.
Global The option of foreign direct Foreign companies and investors can
Expansion investment in case of LLPs is easily invest in Private Limited
available subject to certain Companies. Foreign Direct Investment
conditions, is more complicated opens doors for companies to take their
and regulated. Also LLP is not as business overseas, thereby giving
attractive as Pvt Ltd for FDI. tremendous opportunities for growth,

Office No 16, Sri Krupa Market, Malakpet, Hyderabad – 500036, Telangana,

India
 even beyond national boundaries.
Easy Diversification in case of an LLP The business in case of Private Limited
Diversification is a complicated process since the Companies can be easily diversified as
business of LLP is bound by its there are no strict regulations governing
  agreement the same

Thank you!

Disclaimer: This write-up is meant only for the purpose of information and it shall not be
considered as an advice or opinion on the above-mentioned subject.

Compiled by

Srimanth Kulkarni, ACA, CS

Partner
Jyothi Prakash & Co
Chartered Accountants

Office No 16, Sri Krupa Market, Malakpet, Hyderabad – 500036, Telangana,

India