More and more people are choosing to register their businesses in recent years, increasing the importance of company registration. Company registration can be carried out using a variety of business structures, just as with any other task. India has a number of prominent company registrations, including registered private limited companies and limited liability partnerships.
Companies can be registered as Private Limited Companies and as LLPs, and both provide several advantages that can entice individuals. Before registering and running a business in India, a business should consider the pros and cons of every business model.
Limited Liability Partnership & Private Limited Company?
Contents
A Private Limited Company is one owned by a small business privately. Private limited companies’ members are protected from liability with regard to their shares. Only internal members can own shares of the same and they cannot be traded publicly.
LLP companies, on the other hand, are those that are owned by a minimum of two members and are open to additions. LLP companies provide limited liability just like private limited companies.
Differences between LLP and Private Limited Company?
The formation of LLPs in India is very new in comparison with the formation of Private Limited Companies. They differ in certain ways. They are as follows:
- Different Requirements: The PLC requires a minimum of two members and directors and shareholders and a maximum of fifteen members, LLP company registration on the other hand needs just two partners and designated partners for its formation. Even the cost of incorporating an LLP is comparatively less as compared to the Private Limited Company.
- The Difference in Naming: An LLP must have the word Limited Liability Partnership at the end of its name whereas a private limited company must have the word ‘Private’ in its name.
- The Difference in Tax Structure: While private limited companies pay income tax on their earnings, limited liability partnerships pay income tax and alternate minimum tax.
- Different Charter Documents: In order to form a private limited company, you need the Memorandum of Association and Articles of Association, while to form an LLC, you need the LLC agreement.
- Annual Meetings: In a Limited Liability Partnership, there are no such compulsions as there are for Private Limited Companies, which must meet at a predetermined time.
- Share Transfer: Private Limited Companies facilitate the easy transfer of shares to another shareholder, while Limited Liability Partnerships require shareholders to sign an agreement regarding the transfer of shares.
- Voting Rights: Limited liability partnerships’ voting rights are determined by the agreement concerning the LLP, while limited liability companies’ voting rights are determined by the shares stockholders hold.
Conclusion
There has been a significant increase in company registrations, making it difficult to decide which is best for you. By understanding business models, one can make better decisions that can benefit themselves. Individuals seeking company registration can therefore benefit greatly from knowing about the different forms of company registration.