Difference between a Private Company and an LLP

Ever wondered which is the best form of entity suitable for your business?

Here is a difference between company and LLP.

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Particulars	Private Limited Company	LLP
Governed By	Companies Act, 2013	LLP Act, 2008
Directors Required	Minimum : 2 Maximum : 15	​Minimum Designated Partners : 2
Members Required	Minimum : 2 shareholders Maximum : 200 shareholders	Minimum : 2 partners Maximum : No Limit
Minimum Capital / Contribution Required	No minimum share capital required	No minimum contribution required
Board Meetings	Minimum 4 Board Meetings in a financial year	No such requirement
General Meeting	Compulsory to conduct one Annual General Meeting (AGM)	No such requirement
Governing documents	Memorandum of Association (MOA) Articles of Association (AOA)	LLP Agreement
Voting Power for Members	Voting power is in the ratio of percentage shareholding	One member one vote irrespective of amount of contribution
Statutory Audit	Mandatory	Not required unless partners contribution exceeds 25 lakhs or annual turnover exceeds 40 lakhs.
Mandatory Annual Compliances	AOC-4 (Filing of financial statements) MGT-7 (Filing of annual return) DPT-3 (Filing of deposits) DIR-3 KYC (KYC of Directors) ADT-1 (Appointment of Subsequent Auditors) MSME-1 (Filing of pending payments of MSME vendors)	Form 8 (Statement of Account & Solvency) Form 11 (Filing of Annual Return of LLP) DIR-3 KYC (KYC of Designated Partners)
Event Based Compliances	INC-20A (Commencement of Business - within 180 days from incorporation) ADT-1 (First auditor appointment) DIR-12 (Appointment or resignation of directors) ADT-3 (Resignation of auditors) PAS-3 (Return of allotment of shares) SH-7 (Alteration of Share Capital) SH-4 (Transfer of shares) MBP-1 (Notice of interest of directors) DIR-8 (Notice of non-disqualification by directors) MGT-14 (Filing of resolutions adopted in meetings of the company) INC-22 (Notice for change of situation of the registered office of the company and its verification) CHG-1 (Registration of Charge) STK-2 (Closure of company)	Form 3 : Information regarding the limited liability partnership agreement and changes, if any, made therein Form 4 : Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner. and consent to become a partner/designated partner. Form 5: Notice for change of name Form 9 : Consent form to be filed at the time of Incorporation of LLP Form 12: Form for intimating other address for service of documents Form 15: Notice for change of place of registered office Form 17: Application and statement for conversion of a firm into Limited Liability Partnership (LLP) & to be filed along with Fillip Form 18: Application and Statement for conversion of a private company/ unlisted public company into a limited liability partnership (LLP) & is to be filed along with Fillip Form 22: Notice of intimation of Order of Court/ Tribunal/CLB/ Central Government to the Registrar Form 23: Application for direction to Limited Liability Partnership (LLP) to change its name to the Registrar Form 24: Application to the Registrar for striking off the name Form 25: Application for reservation/ renewal of name by a Foreign Limited Liability Partnership (FLLP) or Foreign Company Form 31: Application for compounding of an offense under the Act Form 32: Form for filing addendum for rectification of defects or incompleteness
Tax Rate	Where its total turnover or gross receipt during the previous year 2021-22 does not exceed Rs. 400 crore - 25% Any other domestic company – 30%	30%
Advantages	Lower tax rate Separate legal entity	Lower Compliance cost as compared to private limited company No requirement of minimum contribution No requirement of compulsory Audit XBRL is not applicable
Disadvantages	Restriction on number of Members More compliance cost More registration cost Statutory audit is mandatory XBRL is applicable in certain cases which in turn is a lengthy process	More tax rate Most of the matters like provisions relating to meetings are not specified in the act. LLP deed shall be amended and Form 3 and form 4 needs to be filed again and again whenever their is an changes in the LLP deed
Resolution of disputes	Disputed party can go to NCLT, NCLAT in case of any disputes	Resolution of disputes is as per the LLP agreement.

Disclaimer: This article is intended for educational and informational purpose only. It is recommended to seek the assistance of a Practising Company Secretary or consultant in India to choose the most appropriate type of entity for your business.

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