Partnership vs LLP vs Private Limited Company
Proprietorship vs Partnership vs LLP vs Private Limited Company vs OPC
Selection of business entity is among the first legal decision taken by an Entrepreneur while starting a new business. With the introduction of the Limited Liability Partnership Act and the Companies Act, 2013, more choices of business entities are now available. Therefore, it is important for the Entrepreneur or Promoter to understand the pros and cons of each of the business entity and choose the right one. Among the choice of For-Profit entities available like Proprietorship, Partnership, Limited Liability Partnership, One Person Company, Private Limited Company and Limited Company, a few are ideal for most Entrepreneurs. In this article, we compare those types of entities viz. Proprietorship vs Partnership vs LLP vs Private Limited Company vs One Person Company.
Registration
Proprietorship
There is no formal registration for Proprietorship.
Partnership
Partnership can be registered or unregistered. Registration of Partnership is optional. If registered, Partnership is registered under the Partnership Act, 1932.
LLP
LLP will be registered with the Ministry of Corporate Affairs under the Limited Liability Partnership Act, 2008.
Private Limited Company
Private Limited Company will be registered with the Ministry of Corporate Affairs under the Companies Act, 2013.
One Person Company
One Person Company will be registered with the Ministry of Corporate Affairs under the Companies Act, 2013.
Name of the Entity
Proprietorship
The Promoter’s choice of name can be used for the Proprietorship. No approval is necessary for using name; however, it is good to avoid trademarked names.
Partnership
The Promoters choice of name can be used for the Partnership. No approval is necessary for using name; however, it is good to avoid trademarked names.
LLP
The choice of name provided by the Promoter must be approved by the Registrar of Company. Only names that are not identical / similar to an existing company or LLP name and names that are not offensive or illegal would be allowed. The name of the entity will end with the words “Limited Liability Partnership” or “LLP”.
Private Limited Company
The choice of name provided by the Promoter must be approved by the Registrar of Company. Only names that are not identical / similar to an existing company or LLP name and names that are not offensive or illegal would be allowed. The name of the entity will end with the words “Private Limited Company”.
One Person Company
The choice of name provided by the Promoter must be approved by the Registrar of Company. Only names that are not identical / similar to an existing company or LLP name and names that are not offensive or illegal would be allowed. The name of the entity will end with the words “OPC” or “One Person Company”.
Legal Status of Entity
Proprietorship
Proprietorship is not recognised as a separate legal entity and the promoter is personally liable for the liabilities of the Proprietorship.
Partnership
Partnership is not recognised as a separate legal entity and the promoters are personally liable for the liabilities of the partnership.
LLP
LLP is a separate legal entity registered under the LLP Act, 2008. The partners of a LLP are not personally liable for the liabilities of the LLP.
Private Limited Company
Private Limited Company is a separate legal entity registered under the Companies Act, 2013. The Directors and Shareholders of a Private Limited Company are not personally liable for the liabilities of the Company.
One Person Company
One Person Company is a separate legal entity registered under the Companies Act, 2013. The Director and Nominee Director of a One Person Company are not personally liable for the liabilities of the Company.
Member(s) Liability
Proprietorship
Proprietor has unlimited liability and is responsible for all the liabilities of the Proprietorship.
Partnership
Partners have unlimited liability and is responsible for all the liabilities of the Partnership.
LLP
Partners have limited liability and is liable only to the extent of their contribution to the LLP.
Private Limited Company
Shareholders have limited liability and is liable only to the extent of their share capital.
One Person Company
Director and Nominee Director have limited liability and is liable only to the extent of his/her share capital.
Minimum Number of Members
Proprietorship
Can have only one person as member.
Partnership
A minimum of two persons are required to start a Partnership.
LLP
A minimum of two persons are required to start a LLP.
Private Limited Company
A minimum of two persons are required to start a Private Limited Company.
One Person Company
A minimum of two persons are required to start a One Person Company, viz. Director and Nominee Director.
Maximum Number of Members
Proprietorship
Can have only one person as member.
Partnership
The maximum number of partners can be only 20.
LLP
A LLP can have unlimited number of Partners.
Private Limited Company
A Private Limited Company can only have a maximum of 200 shareholders or members.
One Person Company
A One Person Company can have only two people, viz. Director and Nominee Director.
Foreign Ownership
Proprietorship
Foreigners are not allowed to start a Proprietorship.
Partnership
Foreigners are not allowed to start a Partnership.
LLP
Foreigners are allowed to invest in a LLP only with prior approval of Reserve Bank of India and Foreign Investment Promotion Board (FIPB) approval.
Private Limited Company
Foreigners are allowed to invest in a Private Limited Company under the Automatic Approval route in most sectors.
One Person Company
Director and Nominee Director cannot be Foreigners.
Transferability
Proprietorship
Not transferable.
Partnership
Not transferable.
LLP
Ownership can be transferred.
Private Limited Company
Ownership can be transferred by way of share transfer.
One Person Company
Ownership can be transferred.
Existence or Survivability
Proprietorship
Existence of a Proprietorship business is dependent on the Proprietor.
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.
One Person Company
Existence of a One Person Company is not dependent on the Director or Nominee Director. Could be dissolved only voluntarily or by Regulatory Authorities.
Taxation
Proprietorship
Taxed as individual, based on the total income of the Proprietor.
Partnership
Partnership profits are taxed at 30% plus surcharge and cess as applicable.
LLP
LLP profits are taxed at 30% plus surcharge and cess as applicable.
Private Limited Company
Private Limited Company profits are taxed at 30% plus surcharge and cess as applicable.
One Person Company
One Person Company profits are taxed at 30% plus surcharge and cess as applicable.
Annual Statutory Meetings
Proprietorship
No requirements to conduct annual statutory meetings.
Partnership
No requirements to conduct annual statutory meetings.
LLP
No requirements to conduct annual statutory meetings.
Private Limited Company
Board and General Meetings must be conducted periodically.
One Person Company
No requirements to conduct annual statutory meetings.
Annual Filings
Proprietorship
No requirements to file annual report with Registrar of Companies. Income Tax Return must be filed based on the income of the Proprietorship.
Partnership
No requirements to file annual report with Registrar of Companies. Income Tax Return must be filed for the Partnership.
LLP
LLP must file Annual Statement of Accounts & Solvency and Annual Return with the Registrar each year. Income Tax Return must also be filed for the LLP.
Private Limited Company
Private Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies each year. Income Tax Return must also be filed for the Private Limited Company.
One Person Company
One Person Company must file Annual Accounts and Annual Return with the Registrar of Companies each year. Income Tax Return must also be filed for the One Person Company.
Registration Cost
Proprietorship
IndiaFilings offers Proprietorship Registration at an all inclusive price of Rs.6,000/-
Partnership
IndiaFilings offers Partnership Registration at an all inclusive price of Rs.6,000/-
LLP
IndiaFilings offers LLP Registration at an all inclusive price of Rs.8000/-
Private Limited Company
IndiaFilings offers Private Limited Company Registration at an all inclusive price of Rs. of Rs.16,000/-
One Person Company
IndiaFilings offers One Person Company Registration at an all inclusive price of Rs. of Rs.16,000/-
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