When starting an enterprise, one of the most fundamental and preliminary questions raised by an entrepreneur is which kind of entity, a private company incorporated under the Companies Act, 2013 (Companies Act) or a limited liability partnership established under the Limited Liability Partnership Act, 2008 (LLP Act), would be most suitable to the enterprise. This article discusses the options that an entrepreneur should consider while forming an enterprise.
Why should you choose a Private Limited Company!
A Private Limited Company has some basic advantages over the Limited Liability Partnership firm, which are as follows:
1. Higher Credit Worthiness then LLP due to its stringent compliances and disclosures
2. Has share capital which allows you to raise funding and offer ESOP's to attract talent
3. Easy Exit and Entry process of Directors
4. Lower Income Tax rate as compared to LLP
5. More attractive to Venture Capitalists and Angel Investors.
Know more about Private Limited Company on this link:
https://www.indiacompliances.in/private-limited-company
Why should you choose a Limited Liability Partnership!
While there are many advantages of a Private Limited Company over a LLP, however the below advantages of forming a LLP are quiet attractive nowadays.
1. LLP's having a capital amount less than 25 lakhs and turnover below 40 lakhs per year do not require any formal audits.
2. Transferring the ownership of LLP is simple. A person can quickly be inducted in as a designated partner and the ownership switches to them.
3. Lower cost of Annual Compliances as compared to a Private Limited Company
4. Suitable for Small Businesses in India
Rest the below table represents the various technical differences which will help you form your decision on which type of entity is best suited for your business.
The selection of form of business organization depends upon the business rationale, funding requirement, ownership and management control and such other factors.
Further you can ask any direct queries in this regards in the comment box below and one of our experts will answer your queries within 24 Hrs.
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