Private Limited Company VS Limited Liability Partnership (PLC vs LLP)

Let us guess, you’re a budding entrepreneur and trying to decide what business structure will suit your business the best. Well, you’re at the right place! Keep on reading and this blog will help you make a wise decision & PLC vs LLP)

There are a total of 5 different business structures in India. These 5 are Sole Proprietorship, Partnership Firm, One Person Company (OPC), Private Limited Company (PLC), and Limited Liability Company (LLP). The most popular of these are definitely Pvt Ltd company registration and LLP registration.

Let us simplify it for you. Both are similar to each other because of the separate legal entity of the company and limited liability of owners/partners, yet distinguishable in many ways.

We realize that as an entrepreneur, you must consider the incorporation process, perks, taxes and compliances, and a variety of other criteria before making your selection. Let us break it down for you one by one.

Private Limited Company VS Limited Liability Partnership (PLC and LLP)

Definition of PLC vs LLP

Let us guess, you’re a budding entrepreneur and trying to decide what business structure will suit your business the best. Well, you’re at the right place! Keep on reading and this blog will help you make a wise decision & PLC vs LLP)

Let us guess, you’re a budding entrepreneur and trying to decide what business structure will suit your business the best. Well, you’re at the right place! Keep on reading and this blog will help you make a wise decision & PLC vs LLP)

Pvt Ltd Company registration is introduced under the Companies Act 2013 and governed by the Ministry of Corporate Affairs (MCA). There should be at least 2 directors and 2 shareholders, the directors being the managers and shareholders being the owners of the company. A director and a shareholder can be the same person. However, they have different roles and responsibilities to perform in the company. Also, the company has a separate legal entity from the owners. Thus, the company has a perpetual succession. 

LLP is introduced under the LLP Act, 2008. In this form of business, at least 2 designated partners are required. Similar to PLC, both partners have limited liability.

Benefits of PLC vs LLP

Pvt Ltd company registration is highly preferred by those entrepreneurs who want to raise funds through private placement, angel investors, and venture capitalists. Also, the company and owners have a separate legal entity. Hence, the owners are not liable in case of distress and insolvency.
LLP registration is a simpler form of business because it has low compliance requirements. In this form, partners have limited liability and separate legal existence from the company.

The minimum requirement in PLC vs LLP 

For private limited company registration, a minimum of 2 shareholders and 2 directors are required. A shareholder and a director can be the same person. However, one director must be an Indian citizen and must stay in India continuously for at least 182 days. Moreover, the registered office must be in India. The office can be registered at a commercial property or a residential property.

For LLP registration in India, 2 designated partners are required and one must be an Indian citizen and reside in India for at least 182 days. Similar to PLC, LLP must also have a registered office address in India.

The business objective in PLC vs LLP

Pvt Ltd company registration is preferred by entrepreneurs who want more flexibility in raising funds through private placements, ESOPs, angel investors, etc.
Whereas with LLPs, businesses are driven by the roles and responsibilities of the partners.

Ownership Flexibility in PLC vs LLP

In PLC, there is a clear distinction between owners and managers. Shareholders get the ownership flexibility because they have voting rights. On the other hand, managers are responsible for day-to-day operational work.

In LLP, there is no clear distinction between owners and managers. Thus, partners hold ownership and managerial rights, but in PLC, shareholders don’t need to have managerial rights. Here, partners are accountable for the business operations.

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Compliances in PLC vs LLP

  • Below is the list of compliances for PLCs:
  • A statutory auditor must be appointed within 30 days
  • Open a current bank account
  • Filing of form INC-20A
  • Shareholder’s certificate
  • Maintain statutory registers
  • Conduct 4 boards of meeting in a year with not more than 120 days gap between 2 meetings
  • Annual form filing of MGT-7 and AOC-4

LLP has fewer compliances:

  • A statutory audit is required only when the turnover crosses ₹40 lakhs and capital contribution exceeds ₹25 lakhs in a year
  • Annual form filing of Form-11 and Form-8

Applicable taxation in PLC vs LLP

Applicable taxation in PLC and LLP
  • If you register a pvt ltd company in India, applicable taxation is the same for the assessment years 2021-22 and 2022-2023:
  • If the total turnover in 2018-19 does not exceed ₹400 crores, then a 25% income tax rate is applicable in 2021-2022. 
  • Similarly, if the total turnover does not exceed ₹400 crores in 2019-2020, then a 25% income tax rate is applicable in 2022-2023. 
  • Apart from these scenarios, a 30% income tax rate is applicable.
  • For LLPs, a 30% income tax rate is applicable.

Conclusion 

We hope this blog helps you get a clear picture of the differences between PLC vs LLP. If you still have any doubts, get in touch with us at LegalWiz.in and we’ll help you make a wise and informed decision depending on the nature of your business. Also, if you are ready to ride ahead with the registration process, our professional will help you throughout the registration process. Good luck with your new venture!

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