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 2 Replies

Kevin Moses Paul   10 September 2021

As per your query, I've discussed the nature as well as advantages of both a Pvt. Ltd. Company as well as LLP, which you must go through in order to acknowledge which one them is more fruitful and better for you as an individual.

✴️ Basically, an LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.

✴️ The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.

✴️ The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.

✴️ Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

✴️ Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.

Henceforth, since a LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

A LLP is a form of business model which provides certain advantages, such as:-

(i) is organized and operates on the basis of an agreement,
(ii) provides flexibility without imposing detailed legal and procedural requirements, and
(iii) enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner.

A Pvt. Ltd. refers to a private limited company that is held for small size businesses where the liability of all the members of a private limited company depends upon the number of shares that are held by each of the members.
Moreover, the a private limited company cannot trade its shares publicly.

Other than the limited liability and minimal statutory compliances, pvt ltd companies offer the various advantages such as:-
✴️ Separate Legal Entity,

✴️ Uninterrupted existence,

✴️ Limited Liability,

✴️ Free & Easy, transferability of shares,

✴️ Owning Property,

✴️ Capacity to sue and be sued,

✴️ Dual Relationship, and

✴️ Borrowing Capacity.

Hope the above mentioned information helps, however it's your call to choose any of them after acknowledging all of the advantages of each such that you know which of them fits your criteria and would be advantageous for you in future. In case of any further issue, I would suggest you to take some business related consultation from someone expert in this field.

Hope It Helps!

Kevin M. Paul

M V Gupta (Advocate)     11 September 2021

In my view, the line of difference between the two types of organizations is very thin in so far as liability of shareholders is concerned and both have separate legal personality. The formalities in organizing the Pvt Ltd company are more complicated than those applicable to LLP. LLP requires only an agreement between participating partners; whereas, in the case of Pvt Ltd company, there should be a Memorandum of Association and Articles of association with elaborate details as required in the Act and the Company Rules. If the proposed venture requires large capital investment and a large number of shareholders, then one should choose Pvt Ltd company structure which commands a better standing in the view of banks and investors angle. So far as tax payable on the profits, in both cases, the rate applicable is 30%.

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