If you are planning on starting a business, you want to choose a structure that will help you with your purpose. A Private limited company(Pvt Ltd) and a Limited liability partnership (LLP) are both different types of entities, but there isn’t much difference between them. Most people get confused about which entity they should choose.
Here are the main differences which make a Private Limited Company different from a Limited Liability Partnership.
Table Of Contents
What is A Private Limited Company(Pvt Ltd)?
What are the Steps to incorporate a Private Limited Company?
What documents are required to incorporate a private limited company?
What is a Limited Liability Partnership (LLP)?
What are the Steps to incorporate a Limited Liability Partnership (LLP)?
What documents are required to incorporate a Limited Liability Partnership (LLP)?
Difference between a Private Limited Company and LLP?
Conclusion
What is A Private Limited Company(Pvt Ltd)?
A Private limited company is a company for small businesses/startups. The liability of the members in a Private Limited Company is limited to the shareholders’ number of shares, respectively. It is the most preferred choice in India because of the debts, the risks, and also the responsibilities are made in the organization’s name, not in yours.
What are the Steps to incorporate a Private Limited Company?
1: Apply for Digital Signature Certificate(DSC) and DIN
2: Approve Company Name from Ministry
3: Obtain Certificate of Incorporation
4: Apply for PAN, TAN and open a current account.
Note: No Company/organization can begin its operations without obtaining the Certificate to start the business. One of the frequently asked questions is “Do we need a long list of documents to establish a Private Limited Company”? The answer is No. You need to submit some essential documents, and you don’t need to come physically to submit these documents.
What documents are required to incorporate a private limited company?
For Directors and Shareholders
Identify the two directors and shareholders or more (if any) and submit their documents as given below:
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Identity Proof
– PAN (Indian Nationals) or Passport (Foreign nationals) And
– Passport / Driver’s License / Election ID / Ration Card / Aadhar ID
-
Proof Of Residence
– Bank Statement* / Electricity Bill / Mobile Bill (Anyone) Not older than 2 months
*If the individual has resided at the present address for less than one year, then the previous residential address must also be submitted
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Passport Size Photographs
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Director’s Educational Qualification Certificate
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Proof Of Registered Office
Registered document of title of the premises or notarized copy of lease or rent agreement in the company’s name along with a copy of rent paid receipt not older than one month. NOC from the Landlord to use the premises by the company as its registered office. Bills like gas, telephone, electricity, etc. Which shows the address of the premises in the name of the owner, which is not older than two months.
Great! Now you know everything about a Private Limited company. Now, let us learn about another type of company, which is called as Limited Liability Partnership company.
What is a Limited Liability Partnership (LLP)?
A Limited Liability Partnership means a business where a minimum of two members are required, and there is no limit on the members’ maximum number. The liability of the members of an LLP is limited. It is registered as per the strict guidelines of the Ministry of Corporate Affairs (MCA).
What are the Steps to incorporate a Limited Liability Partnership (LLP)?
There are 4 easy steps:
1: Apply for DSC and name approval.
2: Filing of documents.
3: Registration of LLP Deed.
4: Apply for PAN, TAN and also bank account .
What documents are required to incorporate a Limited Liability Partnership (LLP)?
For Designated Partners
Identify the two directors (or more) and submit their documents as given below:
-
Identity Proof
– PAN (Indian Nationals) or Passport (Foreign nationals) And
– Passport / Driver’s License / Election ID / Ration Card / Aadhar ID
-
Proof Of Residence
– Bank Statement* / Electricity Bill / Mobile Bill (Anyone) Not older than 2 months
*If the individual has resided at the present address for less than one year, then the previous residential address must also be submitted
-
Proof Of Registered Office
A document filed in the title of the company’s property, or a notarized copy of the rental agreement representing the company address and a copy of the rental payment receipt within one month. NOC from the Landlord to use the space as premises by the company as its registered office. Bills like gas, telephone, electricity, etc. Which shows the address of the premises with the name of the owner, which is not older than 2 months.
Difference between a Private Limited Company and LLP?
| Factors | Pvt. Ltd | LLP |
|---|---|---|
| Image & credibility | Better image and credibility in the market as compared to LLP. | Better image & credibility in the market as compared to partnership/ sole proprietor. |
| Authorised capital | Minimum Authorised Capital of Rs. 1 lakh | No Minimum Authorised Capital Required |
| Funding | Easy to raise funds and loans as it is Favourite Business structure for investors. | Fundraising is not as easy as Pvt. Ltd. |
| Employees | Easy to attract employees. | Harder to attract experienced/qualified employees. |
| Selling | Easy to sell | Tougher to sell |
| Compliances | More Compliances | Less Compliances |
| Incorporation | Less time to incorporate | Longer time to incorporate |
| Long term | Costs more in the long run | Costs lesser in the long run |
| Auditing | Auditing required for a minimum capital of 1 lakh | No audit required until the paid-up capital is more than 25 lakhs. |
Looking for How To Choose Between Sole Proprietorship & Private Limited Company?
Conclusion
So you finally know what is the difference between both the entities. So, your final decision will depend upon you and your business. choosing an entity should not be difficult, focus on your business and if you yet haven’t decided between the 2 then let us help you because you know what they say? “A little help does no harm.!”
So after reading this which company will you want to incorporate a Private limited company or Limited Liability Partnership company?
Check How To Choose A Perfect Name For Your Company
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