Which Form to Choose Private Limited Company Or Limited liability Partnership (LLP)?
by Paras Mehra 3.22K
This is probably the most important question that runs through the every proprietor or entrepreneur before choosing the form to business. Anyone who is starting a business always faces the issue of choosing a Private Limited company or the Limited liability partnerships (LLP).
People pay consultancy fees to the legal professional just to know which form should they choose. So, here is the analysis upon which you may yourself decide which way you should choose which will best suit your business type.
| Serial No. | Point of Difference | Private Limited Company | Limited Liability Partnership (LLP) |
|---|---|---|---|
| 1. | Fund Raising | Fund can be raised through any private investor, angel investor or any other fund manager just by diluting the equity shares of the company. | Limited access to funds.Often, investor never invests into the LLP, because it is not as trustworthy as Pvt limited company. |
| 2. | ESOP (Retention techniques) | Company can retain their key resource just by issuing them ESOPs which is oftenly used by the companies | There is no such concept. |
| 3. | Applicable acts and flexibility | Companies are governed by Companies Act, 2013 which is more stringent, complex, and any violation will lead to heavy penalties. | LLP are governed by LLP Act, 2008, which has very few provisions as compared to Companies Act, 2013. It is very simple, and very less regulated act. Hence, promoters can do transactions as per their need. |
| 4. | Complainces | Complainces works as a burden if not dealt properly. Every company needs to do certain compliances even if the it earns no revenue. | There are very few compliances to be made by the LLP as compared to Private Limited Company. |
| 5. | Preference | It is generally preferred by people with complex transactions, high valuation, goodwill and important factors. Ecommerce ventures or start ups should always choose private limited company as their form of business. | It is generally preferred for traditional business and simple or less complexed transactions. |
| 6. | Important document | Companies are basically governed on their Memorandum of Association (MOA) and Articles of Association (AOA). MOA describes the business of the company, while AOA describes the management of the company. | LLP is governed on the basis of LLP agreement. Whatever has been written in the LLP agreement will be followed blindly unless contrary to the law. |
Conclusion
Hence, on the basis of above factors, you can choose which form is best suited for you. However, in case you are still confused, then you may consult our professional though our contact forms.