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Selection of business entity is made after taking into account factors which includes objectivity of the founder, capital required and available, ownership and management control and such other factors. Hence a general comparison is being provided between three different forms of business entity with the objective to aid users in their selection process.
| Basis of Distinction | Company | Partnership Firm | Limited Liability Partnership |
| Registration | Compulsorily required with ROC. Certificate of Incorporation is to be obtained | Optional. Unregistered firms will not have the right to sue | Compulsory |
| Separate Legal Entity | It is separate legal entity, separate from its member, directors. Limited to the extent of unpaid capital. | It is not separate legal entity from partners. Liability can be extended to the personal assets of the partners. | It is separate legal entity, separate from its partners designated partners. Liability limited to the extent of contribution to LLP |
| Minimum Capital requirement | Minimum paid up capital of Rupees One lac for incorporation of Private company and Rupees five lacs for incorporation of Public Company to be required. | Not Specified | Not Specified |
| No. of shareholders / Partners | In a Private Company, minimum of two and maximum of fifty shareholders. In case of Public Company, minimum of seven and no maximum limit specified | Minimum of two for all firms. Maximum of ten, in case of banks and twenty in case of others. | Minimum of two and no maximum limit specified |
| Contracts / Business transaction by Member/ Directors/ Partners | A director member can enter into contract with the company | A partner can not enter into contract with the firm | A partner can enter into contract with the LLP |
| Ownership of Assets | The company has ownership of assets and members only have shares in the company | Partners have joint ownership of all the assets | The LLP has ownership of assets and Partners only have capital contribution in the LLP |
| Taxability | The income is taxed at 30% rate | The income is taxed at 30% rate | The income is taxed at 30% rate |
| Manner of Keeping Books of Accounts | Accrual basis | Cash basis or accrual basis | Cash basis or accrual basis |
| Filing of Annual Accounts | Balance Sheet and Profit and loss account are required to be filed with the ROC annually in the prescribed format | Not specified | Statement of accounts and solvency are required to be filed with ROC annually in the prescribed format. |
| Audit of Accounts | Accounts have to be audited compulsory on annual basis | The Audit of accounts is compulsory if total sales, turnover or gross receipts exceeds Rs.60 lacs in any financial year | Accounts to be audited annually except for LLP’s having turnover less than Rs. 40 lacs or Rs. 25 lacs contribution in any financial year. |
| Electronic filing of documents | Any documents required to be filed / recorded / registered has to be eâ€filed through affixing digital signature | Any documents required to be filed / recorded / registered has to be submitted manually. | Any documents required to be filed / recorded / registered has to be eâ€filed through affixing digital signature |
Taxmantra.com will assist you in all Business Incorporation & Maintenance issues including Creation of LLPs, Companies etc and also in post incorporation issues such as assistance in other registrations, ROC Compliances and others.