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Difference Between Private Company and LLP

Difference Between Private Company and LLP


Things You Should Know before You Start a Business


 Difference Between Private Company and LLP
Difference Between Private Company and LLP

There are a few things one must consider before starting their own business. Whether it’s the Golden Circle by Simon Sinek, the customers you want to target, or the resources you need in order to get the business up and running, the list really does go on when it comes to business. If this weren’t enough, there are various types of companies one can start, each with its unique features. These must be carefully evaluated, and every pro and con should be weighed against each other to make the right choice for your business model.
Between Private Limited Company and Limited Liability Partnership (LLP), choosing the one which fits your vision can be tricky, and it’s easy to get overwhelmed by the abundance of information available, but this article will make things easy for you to make the best decision for the future of your business. By comparing the defining features of Private Ltd. Companies and LLPs, you can choose which option fits your business plan in the best way possible.
This blog lists a few of the most significant differences between a private company and an LLP.

Company vis-à-vis a Limited Liability Partnership (LLP)

Sr. No
Point of Distinction
Limited Liability Partnership
1. Name The name of company ends with the words Limited or Private Limited as is the case.
Example: ABC Private Limited
The name of any Limited Liability Partnership ends with the words LLP.
Example: ABC Electronics LLP
2. Mode of Incorporation The brief details about the incorporation process of the company is given below:
a.) Processing of the Digital Signatures for the respective Directors.
b.) Filing of E-Form RUN for making an application for checking the availability of the desired name.
c.) Filing of E-Forms for the following purposes:
·     Application or declaration for incorporation of a company
·     Notice of situation of registered office
·     DIN for the Directors of the company, if they are not having their respective DIN’s
·     Particulars of the proposed Directors of the company.
The brief details about the incorporation process of a Limited Liability Partnership (LLP) is given below:
a.) Processing of the Digital Signatures for the respective Designated Partners.
b.) Filing of the E-Form RUN for the application of reservation of the name for the proposed LLP.
c.) Filing of the E-Form LLPIN (related to The Incorporation Document and the Subscriber’s Statement and obtaining DIN)
d.) Filing of the E-Form 3 for providing information with regard to the Limited Liability Partnership Agreement and if any changes to the same are made or not.
3. Minimum Capital / Contribution No minimum paid-up capital requirement. There is no limit for any minimum Contribution from the Designated Partners.
4. Liability The liability with respect to a Company is limited to the amount of the unpaid capital. The liability with respect to a Limited Liability Partnership is limited to the extent of the contribution to the LLP.
5. Main Governing Document The main governing document for the company is the Memorandum of Association and the Articles of Association for the company. The main governing document for any LLP is the LLP agreement drafted between the Designated Partners.
6. Number of shareholders / Partners The minimum number of members for a Private Company is 2 and maximum 200, and for a Public Company, the minimum is 7 and the maximum is unlimited. There should be minimum 2 Designated Partners in the LLP and the maximum number is unlimited.
7. Meetings For any company, it is mandatory to have 4 Board Meetings in a calendar year and an Annual General Meeting every year. There are no such provisions related to the meeting of the Designated Partners of the LLP.
8. Annual Filing The Annual Accounts for the company, i.e. the Balance Sheet and the Profit and Loss Account for the year ended should be filed every year for the company along with the Annual Return for the company. Hence, the Annual General Meeting of the company should be held within 6 months of the date on which the financial year of the company ends and the same should be filed electronically. Apart from that Annual Return through E-Form within 30 days of the AGM.
Other Forms as per event – which requires filing.
With regards to the Financial Disclosures related to the LLP, Every limited liability partnership shall keep books of accounts which are sufficient to show and explain the limited liability partnership’s transactions and enable the designated partners to ensure that any Statement of Account and Solvency prepared under this rule complies with the requirements of the LLP Act. In connection with this, every limited liability partnership shall file the Statement of Account and Solvency in E-Form 8 with the Registrar, within a period of thirty days from the end of six months of the financial year to which the Statement of Account and
Solvency relates.
9. Audit Every Company should be carrying out its detailed audit every year, irrespective of Share Capital and Turnover of the company. The financial audit of the LLP is required if the contribution is above Rs.25 lakhs or if annual turnover is above Rs. 40 lakhs.
10. Dividend Companies are required to follow the procedure under Companies Act, 2013 for arriving at a figure of profits available for dividend and also has provisions which state the detailed procedure related to the distribution of the Dividend to the shareholders. In case of an LLP there is no concept of dividend. This makes a way for free and  unrestricted distribution of profits to partners
11. Investment by Foreign Companies It is allowed under the Automatic Route. RBI FEMA compliances will follow. It is allowed under the Automatic Route. RBI FEMA compliances will follow.