LLP Vs Private limited company - Comparison between two important forms of organisation in India (2024)

• Posted On

  April 7, 2022

• Posted By

  ByTeam Ebizfiling

• Category
  • Articles - Company Law
  • Articles - Entrepreneurship
  • Company law
  • Entrepreneurship

Private Limited Company and Limited Liability Partnership are two different business structures governed by two different acts namely Companies Act 2013 and Limited Liability Partnership Act 2008 respectively. Both entities i.e. Pvt Ltd and Limited Liability Partnership offer many similar features required to run a small to large-sized business, while there are many differences also in some aspects. In this article, we will discuss the comparison of Pvt Ltd. vs LLP from the viewpoint of an Entrepreneur starting a new business.

What is the meaning of Pvt Ltd and LLP?

A Private Limited Company is a company that is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded.

A Limited Liability Partnership means a business where a minimum of two members are required and there is no limit on the maximum number of members. The liability of the members of an LLP is limited.

Comparison between LLP vs Private Limited Company

LLP vs Pvt. Ltd. Co., which is better? There are a few similarities as well as a few differences between both types of business organizations i.e. the Private Limited Company and Limited Liability Partnership. Let us discuss both here for better understanding:

Similarities Between Pvt Ltd and Limited Liability Partnership

• Separate legal entity: Both of them have separate legal entities. That means Private Limited Company or LLP is treated as a different individual in the eyes of law.
• Benefits on taxes (taxation): To both types of business structures tax benefits are given. The tax benefits would be 30% of the profits.
• Limited Liability: In the case of Private Limited Company and LLP, the liabilities of the partners would be limited.
• Registration Process: Pvt Ltd registration and LLP registration, Both types of businesses are required to be registered with the Ministry of Corporate Affairs.

Private Limited co. vs LLP Quick Comparison Table

Advantages of Pvt Ltd and Limited Liability Partnership

The advantages of registering Business as an LLP

• An LLP is easier to start and manage and the process has fewer formalities
• It has a lesser cost of registration as compared to a Company
• LLP is like a corporate body having its existence other than its partners
• LLP can be started with any amount of minimum capital

The advantages of registering Business as a Private Limited Company

• There is No Minimum Capital Requirement in the company
• The members have Limited Liability
• It is a Separate Legal entity
• It is a different ‘person’ from the members who compose it

Suggested Read from Ebizfiling: Advantages of Private Limited Company

Pvt. Ltd. Co. and LLP have a lot of similarities yet they both are different in many of its characteristics and structures. If you are an entrepreneur who needs external funding and are aiming towards good turnover, a Private Limited Company is a perfect business structure for you.. While in case you are more than one person who wishes to start the business together with limited liability than Limited Liability Partnership is for you.