It’s the most basic question asked that which form of Legal entity we should register Limited Liability Partnership or a Private Limited Company. Here are some of the basic differences between the two forms, both have their own advantages:
The Government fee for incorporation of a LLP is significantly cheaper when compared to the Government fee for incorporation of a Private Limited Company. LLPs have been introduced to meet the needs of small businesses and hence LLP enjoy lower government fee for incorporation. Also, the number of documents that have to be printed on Non-Judicial Stamp Paper and Notarized is lesser for LLP registration when compared to that of a Private Limited Company registration.
Both LLP and Private Limited Company offer many of the same features. LLP and Private Limited Company are both separate legal entities and have assets and liabilities that are separate from that of the promoters. In a LLP, there is not a clear distinction between the owners and management. In a LLP, the Partners hold ownership of the LLP and also hold powers to manage the LLP offers more flexibility for the promoters when it comes to ownership and ownership sharing.
Private limited companies have been in existence for longer than LLPs and enjoys widespread recognition in India and the world. Therefore, there are well established processes and procedures for Private Limited Companies. LLPs on the other hand is a recently introduced entity in India. Therefore, some of the rules, regulations and procedures are continuing to evolve. LLPs are also not as recognized in India as a private limited company, since it is a relatively new concept.
Partnership- Existence of a Partnership business is dependent on the Partners. Could be up for dissolution due to death of a Partner.
LLP- Existence of a LLP is not dependent on the Partners. Could be dissolved only voluntarily or by an Order of the Company Law Board.
Private Limited Company- Existence of a Private Limited Company is not dependent on the Directors or Shareholders. Could be dissolved only voluntarily or by Regulatory Authorities.
So if you look at it in terms of annual expenses then LLP is a better option as it is comparatively cheaper than Pvt Ltd Company but if you’re looking in terms of recognition then Pvt Ltd Company is a better option.
At the end it depends on the requirements and it’s different for different people.