LLP vs Private Limited Company

LLP vs Private Limited Company

Many Bussiness ma is confused about the different between LLP & Private Limited Company. but are  have the same feature to run  small or large size business while they have different aspect and viewpoint  

Registration Process: 

The Private Limited Company Registration process and the LLP Registration process are very similar with some differences in the documents and forms being filed for incorporation. The steps for incorporation of a Private Limited Company are

1. Obtaining Digital Signature Certificate (DSC) for the proposed Partners

2. Obtaining Director Identification Number (DIN) / Designated Partner Identification Number (DPIN) for the proposed Partners
3. Obtaining name approval from MCA
4. Filing for incorporation. Both Private Limited Company and LLP are registered with the Ministry of Corporate Affairs and are issued a Certificate of Incorporation.
The processing time for incorporation of a private limited company and LLP are also comparable with both entities taking on average about 20 days to incorporate.

Features : 

Both LLP and Private Limited Company offer many of the same features. LLP and
Private Limited Company is both separate legal entities and have assets and
liabilities that are separate from that of the promoters. 

LLP is a separate legal entity registered under the LLP Act, 2008. The partners of an LLP are not personally liable for the liabilities of the LLP. Partners have limited liability and are liable only to the extent of their contribution to the LLP.

Ownership

Private Limited Company offers more flexibility for the promoters when it comes to ownership and ownership sharing. The ownership of a Private Limited Company is determined by its shareholding and a private limited company can have up to 200 shareholders.

In an LLP, there is not a clear distinction between the owners and management. In an LLP, the LLP Partners hold ownership of the LLP and also hold powers to manage the LLP.

Compliance : 

A Pvt. Ltd. The company is required to pay a Dividend Distribution tax @ approx. 16.50 % at the time of distribution of profits to its shareholders. Such dividend income is tax-free in the hands of the shareholders.

The taxation structure for LLP is simpler. LLP is subjected only to Income tax. Dividend Distribution is not applicable to LLP. Once profit is declared and tax is paid by LLP, the distributed income is tax-free in the hands of the partners. Tax is levied on the firm at the rate of 30%. 

Fines and Penalties :

The penalty for non-compliance or late filing of documents with the Ministry of Corporate Affairs is most of the time higher for an LLP as a flat fee of Rs.100 per day is levied when the non-compliance continues with no cap on the liability. Therefore, LLPs could incur a larger penalty or fines from MCA due to non-compliance. Therefore, it is important for the promoters of an LLP to be aware of the due dates and file the required documents with the registrar on time.