As an owner of small business, if you are planning to â€œgo limitedâ€, you have basically two options: either go for limited company or limited partnership. But if the business is such that, it will involve few members then Limited liability Partnership has a cutting edge over Private limited company. Limited Liability Partnerships (LLP) is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.Â To be more specific, LLP has following advantages over a Private limited in the following manner:
- Forming LLP is cost effective and requires lesser legal compliances like, Incorporation Document is neither required to contain MOA and AOA nor the State in which it is incorporated;
- Compliance with accounting standards is mandatory in case of companies whereas LLPÂ is not yet notified;
- Companies are mandatory required to get their accounts audited annually whereas for LLPs only those having turnover more than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the LLP Act;
- LLP is tax efficient as Minimum Alternate Tax and Dividend Distribution Tax is not applicable on LLP;
- Unlike companies, Compliances such as statutory meetings and similar compliances are not required for LLPs;
- Professionals like CAs and CSs can practice in a joint name under LLP;
- Formation of LLP is relatively hassle free as compared to an incorporated company. The expenses of formation and post incorporation of a LLP is less as compared to a Private Limited Company.
LLP is the most convenient mode of business if you are thinking of a start-up and if you are having an existing business then provision for conversion is also available as per the Law. However, a Private Limited Company has its own advantages, such preference given by funding houses; Banks prefer transacting with Private Limited as compared to LLPs, Management transparency to name few. Thus, whether to incorporate a Private Limited Company or a LLP should be purely analysed by the objective of the entrepreneur and time horizon. We at Taxmantra.com have the expertise in the field of business start-up, assisting hundreds of entrepreneurs in resolving their start-up issues.Â We render under “Business Incorporation” services such as:
- Creation of Company;
- Creation of LLPs;
- Creation of General Partnerships;
- Start-Up Counselling;
- Assistance in other registrations.
Please visit our ” Business Incorporation” Segment on the home pageÂ to know more details on this.