Difference Between LLP and Company

Introduction 

Before starting a new business, it is important to understand the difference between llp and company. Choosing the wrong structure can result in an incremental cost & time of converting LLP into company or vice-versa. It is important to understand the features and benefits of LLP and company before starting a new business. Limited Liability Partnership and Private limited Company both have their own advantages and disadvantages, understanding their differences can help you to select the right entity. Read this blog related to llp vs pvt ltd company to understand their difference based on taxation, number of members, etc. 

What is a Limited Liability Partnership? 

A limited Liability Partnership is a separate legal entity which can enter into agreement with a third party under its own name. LLP has perpetual succession which means it continues to run in the event of the death of a partner. The partners have limited liability which means their liability is only limited capital contributed by them. In case of any debt or liability of an LLP, partners of LLP don’t need to pay from their personal assets. 

What is a Private Limited Company? 

A private limited company is registered under company act 2013 and the objective of the company is defined under memorandum of association. A private limited company is a business company established by private stakeholders. In India, a private limited company is the most popular type of business structure due to its various advantages, including limited liability protection, ease of formation and maintenance, and separate legal entity status.

Difference Between LLP and Company

The confusion of selecting the right option before starting your company is a common problem that people usually face. Both limited liability partnership and private limited company have their own benefits, limitations and consequences. However, there are certain differences between LLP and Pvt Ltd Company and these are as follow: 

Features of Limited Liability Partnership 

There are certain features of a Limited Liability Partnership which highlights its working style. These features are as follow: 

• Ongoing Process: LLP continues its operations irrespective of death, retirement insolvency or change of a partner. 

• Separate legal entity: In this, the partner’s liability is limited which means their assets will not be used to pay LLPs debts. 

• Mutual Agency: It is a mutual agency and partners are independent to give their opinion. 

• LLP Agreement: Every LLP has its own LLP Agreement which includes the rights and duties of the partners. 

• Minimum & Maximum Number of Partners: Atlast two designated partners are required to start a LLP. There is no maximum number of partners in LLP. 

Features of Private Limited Company 

Private Limited Company have some special features which makes it different from other business structures. These features include: 

• Ownership Transferability: Private Limited Company allows easy ownership transferability by transferring the ownership of the shares. 

• Raising Capital: Private Limited Company allows you to raise funds by using venture capital, foreign direct investment, etc. 

• High Compliance Obligations: Private Limited Company required a lot of compliances just after the incorporation as well annually. 

• Mandatory Tax Audits: A private limited company needs to have mandatory tax audit. 

Conclusion

There are a lot of differences between llp partnership and company but both of them have their own features which make them unique from each other. Choosing between them totally depends on your business needs and structure. There are many differences such as Compliances, taxation, fund sources which shows their unique identity. However, both LLP and Private Limited Company require attention to work properly and grow successfully. 

Frequently Asked Questions (FAQs)

• Can an LLP be called a company?

No, as per act 2008, an LLP does not include the features of a company.

• Which is better, LLP or Company?

Both, LLP and Company have their own unique features and both are perfect at their own place. 

• Is LLP registration mandatory?

Yes, It is mandatory to get your LLP registered. 

• Who controls an LLP?

An LLP is managed and controlled by its designated Partners.