Many entrepreneurs have the intentions to start a Top business. But they are confused about the comparison of entities and which entity should use. Consistently, There are vast varieties of business forms. All of them differ in certain angles. Take a look at different forms of business. Private limited, public limited, OPC registration, LLP, Partnership, sole proprietorship, section 8, nidhi, etc. Let us discuss about Limited liability partnership, Private limited company and their differences. But both entities have some sort of similarities. These entities help us to form small scale to large scale businesses.
Normally, The Pvts as well as the LLPs both are having some forms of similarities in the registration process but some difference in the document submission scheme. Let us discuss about the steps for the incorporation strategies and also discuss the top comparison between them.
Incorporation and comparison between top LLP and Private Ltd company
- Attaining DSC for the concerned director
- Getting Director Identification Number of proposed director
- Getting name approval from the official portal of MCA.
- Incorporation Trooping
The Top steps for the LLP also has the same sort of steps
- Getting DSC of the director
- Obtain the DIN of the director or DPIN of designated member
- Name approval action from MCA
- Filing the registration
Both companies are registered under ministry of corporate affairs and are using a certificate of registration. Both of the entities took 10-12 days to complete. Similarly, The registration cost for LLP is comparatively less when compare with Private company. LLP is mainly for small scale business industries. The documents printed on the non-judicial stamp paper are lesser for LLP when compared with private limited one.
Features of private and LLP Company
LLP and Private Companies both are separate entities. In other words, They have certain liabilities and assets and are different from promoters. boh have included certain comparison. Private limited companies are flexible because we can transfer the ownerships easier than anything. The LLP and Private Company both are perpetual and can winds up the business by promoters or any competitor authority. The limited liability partnership incorporated under the LLP Act, 2008. The personal assets of each partner do not have any impact on the debts of the LLP. Considerably, They are only capable of how much they are investing on the company shares. The private limited company is registered under the company’s act, 2013. Here also the partners are not liable for the company debts and shares. Additionally, Each shareholders having limited liabilities to the extent of the amount they invested.
Ownership of the company
The main benefit of private company is that it shares company ownership more flexible way. The shareholding of the private company is reveales through the ownership liabilities. Such types of company can share up to 200 shareholders. The shareholders do not have the power or permission to interact with the company management and also with the ownership. Thus those companies are more gainful in the sense of ownership and management features. But in case of Limited liability partnership there is no relationship between the owners and management. Here LLP partners are holding the ownership and also powers on management accessibilities. Likewise, The partners can be both owner and manager. But in private company the shareholders have to manage the powers. More importantly, The private company can act as the stock options, FDI, venture capital funding etc for any business.
Compliance of LLP and private company
The tax obedience is same for both of the companies. Though, the compliance comes into the ministry of corporate affairs, the LLP has some added advantages. If the LLP having annual turnover less than 40 lakhs and the capital contribution less than 25 lakhs, do not have to audit the accounts. Each year the private company have to file the financial statement for the auditing with ministry of corporate affairs. Conversely, The dividend distribution tasks also have to pay by the company. The tax consideration of LLP is simpler. LLP is subjecting to the income tax. The dividend distribution is not applicable. The dividend tax is free for partners when the profit is declaring and the tax had paid. The tax rate is 30%. The tax rate applicable on the llp and private limited company registration is limited and considerable.
Punishments and fine cost
The fine charged for the non-compliance and the late filing of documents may charge starting from the flat rate of Rs. 100 per day until it gets files. Thus LLP is charging high penalties for fines with MCA because of the non-compliance. Thus the promoters of the LLP must be aware of the hidden truths of Penalties and last date of filing with registrar.
Other factors that should influence on companies
Admittedly, The private companies have higher existence than LLPs in globally. We can’t able to destroy the company basemen in a shorter period. There contains well modified process and procedures for private limited company. The LLP is a new form of company registration entity and was recently incorporated under the LLP Act. Thus certain rules are still processing. LLP are not recognized worldwide as private sector because it is comparatively a new concept. The private company propose a better image or standing than of LLP. Because the private are can last longer than LLP. Foreign Direct investment and loans from bank etc can access better in private company. This is the added advantages of a private company.
The foreigners are allowing to invest the amount in an LLP registration account with the approval of Reserve bank of India and Foreign investment promotional board. But in case of private company the foreigners are allowing for investment under the Automatic approval route in most sectors.
The partnership existence in a business is dependent on the count and existence of the partners. Additionally, The partnership can wind up only after the death of the partners. In case of LLP the existence is not applicable depending on the partners. The LLP can dissolve only getting the order from company law board. Concerning, The director and shareholders do not have any impact on the existence of the private company. It dissolves by regulatory authorities order.
The directors and the founders of the company are different in both LLP and private limited company. Those entities are having various legal existence and the company seals. The one company seal cannot be used for the other form of entity. The company stops the business only after the authorities decide to windup or the promoters close the business. The private limited company formation is comparatively more challenging and time consuming when we make a comparison with the LLP.
The private company exist longer and enjoys the recognition in worldwide. The process and procedures are already established. Alternatively, The LLP Company became widespread after the introduction of private company’s benefit in their side and addresses the downsides of the partnership business.
FDI in LLP
FDI means the foreign direct investment. The FDI are introduced in LLP via the automatic route in LLP. The LLP is operating in sectors where 100% FDI are allowed through the AR (Automatic route). And also there are no FDI link performance conditions. LLP is the combination of private limited company and the partnership firm. Furthermore, It limits the duties of each partner. The rules under the LLP allow the foreign nationals and foreign LLP’s to become the part of the entity or become the partner of such form of business.
But the foreign exchange management act, 1999’s rules and norms do not allow FDI in LLP. In 2011 the policy related to the FDI was amended and full of FDI were immersed into LLP. On November 2015 the government of India were further cross checked the FDI policies and charge in respect with LLP. It made some extra changes. Those are discussed below.
Changes in FDI
- The LLP allow FDI via automatic route completely, where the sectors fully accepts the FDIs.
- Normally, The LLP allow FDI to make downstream investment on other Company or LLP where 100% FDI is allowed under the automatic route.
- LLP allows FDI to make the downstream investment in other company or LLP where there is no FDI linked conditions are applicable.
- The FDI policy on LLP are subjected to the below downstream payments in the following conditions.
- However, LLP notifies secretarial industrial assistance, department of industrial policy, promotion and foreign investment promotion board etc about the investment downstream and should follow or register within 30 days of investment.
- Notably, Capital contribution may applicable with SEBI/RBI guidelines.
- By getting the downstream investment, LLP making funds from the foreigners and not accept the loans from the local market.
Subsequently, Allowing FDI is a welcome move of India which allows the foreigners to become the part of the company and allows flexibility and tax efficiency in LLP registration structure.
FDI Routes to enter into India
There are two routes presently applicable for FDI in India via LLP. Those are Automatic route and Government Route.
- Automatic Route
Likewise, The automatic route of FDI is allowed, without prior approval from the government and reserve bank of India in all activities mentioned in the FDI policy in time to time.
- Government Route
Accordingly, The FDI which is not under the automatic route requires the permission of the Government which is required by the foreign investment promotion board (FIPB).
The form FC-IL is for application submission. The company in India received the FDI have to comply the FDI provision and policy with the Reserve bank of India. The company can acquire the FDI either in automatic way or Government route. The report also files with the reserve bank.
FDI are not applicable in the below sectors
Conversely, The FDI Is not allowed in the below sectors under the Government and automatic route.
- Lottery business sectors
- Chit fund business
- Nidhi Company
- Real estate
- Farm houses
- TDRS (Trading in transferable development rights)
- Manufacturing of cigarettes, tobacco etc
- Legal services
- Accounting & auditing
Modes of payment in FDI
Incidentally, The Indian company giving shares to the person who lives outside in India, gets the amount of consideration according to the share and convertible debentures according to FDI. The mode of payment by
- Normal bank accounts
- Modes of payment via NRE/FCNR account, ECB or conversion of pre-registration expenses etc.
Specifically, The time duration to issue the shares and debentures under FDI
Concerning , 180 Days from date of receipt of inward remittance is the time duration for issuing the shares and debentures.
If the shares are not convertible within 180 days the amount gets refunded. Specifically, the company can refund the amount within 180 days of the receipt which is given to reserve bank on an application’s security purpose.
Are you still confused about which form of entity want to choose? There are various opportunities for you to start a business. Get a free consultation with Corpstore in Coimbatore. We pledge that we can give the legal certifications in least cost without time lagging. To illustrate, Don’t waste your time while approaching with irrelevant service providers. Each registration is a new step into the new world. So before step up think thrice. We Corpstore provide all types of top company registration services, IPR services and secretarial services. We can handle all your problems and thus you can focus more on your works without any comparison. Come and link in our network. We can show you what a company is.