Comparison in Private company vs LLP
Private company Vs LLP: Incorporation
| Minimum Requirement | 1) Shareholders/ Members- 02 2) Directors- 02 NOTE: Directors or shareholders may or may not be the same. In case of Wholly owned Subsidiary 1 benificiary shareholder to be shown |
1)Designated Partners- 02. 2)Atleast 1 designated partner needs to be an Indian resident, that is, who has stayed in India for a period of not less than 182 days during the immediately preceding year. |
| Maximum Limit | Maximum 200 person can become members/share holder. | There is no limit of maximum number of its partners. |
| Steps for Incorporation | 1) Application for DIN-Form DIR 3 for all directors. 2) Application for Name Approvals-Form INC-1 |
1) Application for DPIN-Form DIR 3 for all Partners. 2) Application for Name Approvals-Form LLP-1 |
| 3) Drafting of Memorandum and Articles of Association.(MOA & AOA) | 3) Drafting of LLP Agreement between Partner & Designated Partners. | |
| 4)Filling of Following Form Toghether i)Application of Incorporation-INC-7 ii)Appointment of Directors -DIR-12 iii)For Registered Office -INC-22 |
4) Filling of Following form for incorporation i) Application for Incorporation-LLP-2 ii)Filling of LLP Agreement -LLP-3 |
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| 5) To obtain Certificate of Incorporation. | 5) TO obtain Certificate of Registration . | |
| Note: Cannot commence business before obtaining certificate of Incorporation | Note: Can commence business on execution of LLP Agreement after obtaining name approval but have to obtain Registration with in 60 days of name approval | |
| MOA/ AOA/ Agreement | 6) Memorandum and Articles of association is a charter of the company which defines the scope of operation. | 6)LLP agreement is a charter of the LLP which denotes its scope of operation. |
| Ownership | The shareholders (owner) do not necessarily need to have management powers. | Partners in LLP will be both owners and managers. |
Private company Vs LLP: Capital Compliance
| Minimum Share Capital | No minimum capital limit. However each share holder must have to contribute some capital amount. | No minimum capital limit. However each partner must have to contribute some capital amount. |
| Incerese Share Capital after Incorporation | Step 1:Increase authorised Share Capital i) Pass resolution in Extra ordinary Genaral Meeting of members(EGM). ii) File MGT-14 with ROC stating reason for holding EGM. iii) Amend MOA & AOA iv) File SH7 Form with ROC v) Pay necessary fees as mentioned under ROC & Stamp duty of respective jurisdiction. Note: Stamp Duty is varable with Authorised Share Capital) |
1) Pass resolution in Partners’ Meeting 2) Amend the Agreement accordingly 3)File LLP-3 form with ROC 4)pay necessary fees(this fees will be less in compare of Private Limited Company) Note: Maximum fees will be Rs. 15,000/- even though capital exceeds Rs. 15,00,000/- |
| Step 2: Increse Paid up Capital i) Pass resolution in Board Meeting. ii) File PAS-3 with ROC iii) Prepare list of Allotees |
Annual or mandatory RoC Compliance: Private company Vs LLP
| ROC Filings(Annualy) | Form AOC- 4 Filling of Audited Balance sheet, Profit & loss account, Cash Flow Statement and Statement of changes in equity Form MGT-7 Annual Return |
E- form 8 Statement of Account and solvency(to be certified by Designated Partner if LLP is not covered under audit) E- form 11 Annual Return |
| Board Meetings | First meeting within 30 days from the date of incorporation. | No compulsory meeting of the prescribed in the LLP act or rules. |
| Minimum 4 board meeting in a calendar year and the gap between two consecutive meetings should not be more than 120 days. | Meetings of partners may be called for events which are not mentioned in LLP Agreement & LLP wants to persue.No requirement of minimum meeting of partners in every year) | |
| Penalties for Non Filling/Late Filings | 1)Late filling of Return will attaract penalties in multiple of original filling fees maximum 12 times of original Filling fees. | 1)Late filling of Return will attract penalty per day upto the date failure continues. |
| Annual General Meeting (AGM) | Mandatory | No AGM is required. |
Books of accounts
| Maintenance of books of accounts | Mandatory | Mandatory |
| Manner of keeping books of accounts | At Registered Place of Business | At Registered Place of Business |
Taxation : Private company Vs LLP
| Income taxed at 25% plus surcharge if any if Turnover is Less than Rs. 500 Millions in F.Y.2015-16 | Income taxed at 30% plus surcharge if any irrespective of size of income. | |
| Annual tax filings | Mandatory- tax return in Form ITR- 6 | Mandatory- tax return in Form ITR- 5 |
| Statutory audit | Compulsory, irrespective of share capital and turnover | Required, if the contribution is more than Rs. 25 lakhs or if the annual turnover is more than Rs. 40 lakhs |
| Tax audit | If the turnover is more than Rs. 1 crore | If the turnover is more than Rs. 1 crore |
| Dividend Distribution Tax (DDT) | The private company has to pay Distribution Dividend Tax (DDT) @ 20.375% on the distribution of dividend to its shareholders. | LLP does not have to pay the Dividend Distribution Tax (DDT) @ 20.375% Means on withdrawal of Capital no tax to be paid in LLP |
| Taxation in the hands of Share holders/Partners | If Shareholder receive more than Rs. 10,00,000/- as dividend individually than shareholder have to pay additional tax @ 10% of such dividend | For Non resident partner no Income tax on share of profit from LLP in India, however the same may be taxable in the country of its residence.
If Non resident partner will relinquish theor rights in LLP in that case Capital gain will apply to that partners & TDS also to be deducted on the basis nature of capital gain i.e Long term/Short term |
| Minimum Alternate Tax | Companies have to pay Minimum Alternate Tax @ 18.5% in case of Income Tax @ normal rate will be less than Minimum Alternate Tax. | LLP need not have to pay Minimum Alternate Tax. If LLP doing specified Business in SEZ area, Tax heaven Area then they have to pay Alternate minimum Tax @ 18.5% |
Liability of Directors/Partners : Private company Vs LLP
| Position | As Agent or Officer of the company | As a Partner of the LLP |
| Contractual Liability | Personally Liable if and only if when he has accepted personally Liability either expressly or impliedly | Personally Liable if and only if when he has accepted personally Liability either expressly or impliedly |
| Civil Liability | Arises when Director 1) is guilty of negligence. 2)Commited breach of trust 3)Acted ultra virus & and uses funds of the company for the same. |
Arise when Partner 1) is guilty of negligence. 2)Commited breach of trust 3)Acted ultra virus & uses funds of the LLP for the same. |
| Tax Liability | Under section 179 of Income tax Act 1961 every person who was a director of the private company shall be jointly & severally liable for payment of such tax.However If he can prove that default on the part of company was not attributable to any breach of his duty than he may not be liable. |
Under section 184 of Income tax Act 1961 every person who was a partner of the LLP shall be jointly & severally liable for payment of such tax. However If he can prove that default on the part of LLP was not attributable to any breach of his duty than he may not be liable. |
Voting Right
| Voting rights are in proportion to the shares held by members. | Each partner has only one vote. |
Compliance:
| Substantial compliance | Less compliance |
Foreign Direct Investment: Private Company Vs LLP:
| Eligible Investors | (i) A non-resident entity (other than citizen of Pakistan and Bangladesh) can invest in India, subject to the FDI policy. | A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLP’s. However, following persons shall not be eligible to invest in LLP’s : A citizen/entity of Pakistan and Bangladesh FDI in LLP is allowed in sectors/ activities where 100% FDI is allowed under the automatic route (i.e. after FIPB approval) and there are no FDI- linked performance related conditions, subject to government approval. |
| Entry route | FDI in private limited company (i) FDI prohibited (ii) Automatic route (iii) Approval route |
Any form of foreign investment in an LLP, direct or indirect shall require government/ FIPB approval.
Approval from FIPB will take approximatly 01 to 2 Months. This will increase the cost of LLP on the basis of Budget proposal FIPB may be done away from 01.04.2018 in that case this point will be relooked. |
| FDI prohibited- Foreign investment in any form is prohibited in a company which is engaged or proposes to engage in the activities specified. | ||
| Automatic route- The foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. | ||
| Approval/ Government route- The foreign investor or the Indian company should obtain prior approval of the Government of India (FIPB, Department of Economic Affairs (DEA), as the case may be) for the investment. | ||
| Mode of payment/ Funding of LLP’s | An Indian company issuing shares/ convertible debentures under FDI scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares/ convertible debentures:
(a) Inward remittance through normal banking channels. |
(a) Downstream investment by a company- An Indian company, having FDI, will be permitted to make downstream investment in LLP’s only if both the company as well as the LLP is operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI- linked performance related conditions.
(b) Investment by cash consideration- only if received by inward remittance, through normal banking channels, or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/ authorized bank. For making non cash/ intangible contribution towards the capital of the LLP, permission of government of India will be required. |
