- Legal Structure: LLP is a form of partnership where the partners have limited liability, and the business is governed by the Limited Liability Partnership Act, 2008. On the other hand, a Pvt Ltd company is a separate legal entity incorporated under the Companies Act, 2013, with shareholders having limited liability.
- Formation: LLP is formed by registering with the Ministry of Corporate Affairs (MCA) by filing Form 1 (Incorporation Document) and Form 2 (LLP Agreement). Pvt Ltd company is formed by registering with the MCA by filing Form INC-32 (SPICe) along with Memorandum of Association (MOA) and Articles of Association (AOA).
- Minimum and Maximum Number of Partners/Shareholders: LLP requires a minimum of 2 partners and there is no maximum limit. Pvt Ltd company requires a minimum of 2 shareholders and a maximum of 200 shareholders.
- Liability of Partners/Shareholders: In an LLP, the partners have limited liability, which means they are personally liable only to the extent of their agreed contribution in the LLP, and not for the acts of other partners. In a Pvt Ltd company, the shareholders’ liability is limited to the extent of their unpaid share capital.
- Management and Decision-making: In an LLP, partners manage the business and make decisions collectively, unless otherwise provided in the LLP Agreement. In a Pvt Ltd company, the shareholders appoint directors who manage the company’s affairs and make decisions on behalf of the company.
- Statutory Audit: LLPs are not required to undergo a mandatory statutory audit unless their annual turnover exceeds Rs. 40 lakhs or if the contribution exceeds Rs. 25 lakhs. Pvt Ltd companies, on the other hand, are required to undergo a statutory audit irrespective of their turnover or capital.
- Taxation: LLPs are taxed at the flat rate of 30% on their total income, while shareholders are not liable to pay tax on the dividend received from an LLP. Pvt Ltd companies are subject to a progressive tax rate, and shareholders are liable to pay tax on the dividend received from a Pvt Ltd company.
- Compliance Requirements: LLPs have fewer compliance requirements as compared to Pvt Ltd companies. LLPs are not required to hold annual general meetings (AGMs), and their financial statements need not be filed with the MCA. Pvt Ltd companies, on the other hand, are required to hold AGMs and file annual financial statements with the MCA.
- Transferability of Ownership: In an LLP, ownership is based on the contribution made by the partners, and the transfer of ownership requires the consent of all partners. In a Pvt Ltd company, ownership is represented by shares, which are transferable as per the provisions of the Companies Act, 2013.
- Foreign Investment: LLPs are not allowed to receive foreign direct investment (FDI) in sectors where 100% FDI is not allowed under the automatic route. Pvt Ltd companies, on the other hand, can receive FDI under the automatic or approval route, subject to the Foreign Exchange Management Act (FEMA) regulations.
- Annual Filings: LLPs are required to file an annual return with the MCA in Form 11 and a statement of accounts and solvency in Form 8. Pvt Ltd companies are required to file an annual return in Form MGT-7, financial statements in Form AOC-4, and a statement of accounts and solvency in Form MGT-9.
- Conversion: An LLP can be converted into a Pvt Ltd company or vice versa, subject to the provisions of the Companies Act 2013.
Difference between Limited Liability Partnership (LLP) and Private Limited (Pvt Ltd) Company under Corporate Law in India
LLP & Pvt Ltd Company
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