Limited Liability Partnership (LLP) vs Private Limited

The key difference between Limited Liability and Private Limited is the tax exemptions and compliance requirement. LLP cannot be converted into any other form of company however; private limited can be converted into Public, One Person Company and LLP.

What is a Private Company?

Private Limited Company can be established when 2 or more people form an association to generate profits through their business operations. These companies do not have the right to transfer their shares publically.

It is a separate legal entity which is run by the Board of Directors and is registered under the Companies Act, 2013. All the decisions related to a private limited company is discussed in the Annual General Meeting.

What is a Limited Liability Partnership?

This form of business includes the benefits of a company and a partnership firm. It can continue its existence even if there are any changes in the partners of the company.

The liability of its partners is limited to the amount agreed up on in the Limited Liability Partnership (LLP) Agreement. The company can enter into contracts and hold/buy property on its own name.

The company is registered under the Limited Liability Partnership Act, 2008 and does not require conducting any General Meeting.  

Difference between Private Limited and LLP 

Comparison

Limited Liability Partnership (LLP)

Private Limited Company

Governing Act

 Limited Liability Partnership Act, 2008 

 The Companies Act, 2013.

Name 

Every Limited Liability Partnnership Company must contain the ‘LLP’ word as suffix.

Private Company must have ‘Private Limited Company’ words as a suffix.

Auditing

When the turnover is Rs.40 lacs or more or contribution is Rs.25 lacs or more.

A Private Limited Company needs to audit its account as per the provisions given under the Companies Act, 2013.

Transferability

In case of LLP ownership can be transferred.

In case of private company ownership can be transferred by way of share transfer only.

 Members

Minimum- 2 partners

Maximum- unlimited partners

Minimum- 2 members

Maximum- 200 members

Foreign Ownership

To be an investor or member of an LLP, the foreign nationals need to get prior approval of the Reserve Bank of India.

Foreigners are allowed to invest in a Private Limited Company without the requirement of any permission. 

Annual Statutory Meetings

No requirement of any annual statutory meeting.

There is a provision to conduct Board Meetings and General Meetings by a Private Limited Company.

Major Document

LLP Agreement denotes the scope of operation, rights and duties of the partners.

MOA (Memorandum of Association) and AOA ( Article of Association) are the charter document of the company.

Conversion

Cannot be converted into a company.

Can be converted into LLP, Public Company and One Person Company. 

Important 

  • In a Limited Liability Partnership the act of one partner can also bind the actions of the others but in case of a Private Limited Company there is no such boundation. 
  • Only Income Tax and Alternate Minimum Tax is applicable on a Limited Liability Partnership however; Private Limited Company has to pay Income Tax, Alternate Minimum Tax and Dividend Distribution Tax also.