LLP vs Sole Proprietorship

LLP has limited liability, a well defined Act, exclusivity of name, growth prospects through branch offices which make it more lucrative over Sole proprietorship.

The Choice between Limited Liability Partnership and Sole Proprietorship is not that difficult. LLP is a hybrid form of business structure compared to the conventional sole proprietorship structure.

The distinction between LLP and Sole Proprietorship


 Particulars Limited Liability Partnership Sole Proprietorship
Liability  The partners have a limited liability which extends to the amount of capital contributed The Proprietor has an unlimited liability which extends to the amount of his/her personal estate.
Act Limited Liability Partnership Act,2008 governs the provisions and compliances of an LLP, failing which penalties are imposed.  There is no separate Act or laws which govern or define the compliance requirements.
Audit Compulsory audit required if LLP crosses 40 lakhs turnover or 25 lakhs capital contribution There is no compulsory audit requirement.
Name  There is no exclusivity of the name. Anyone can register a sole proprietorship with the same name having the same business in a different state.  There is exclusivity of the name. No one can apply for the same name in any other act
Tax Computation An LLP has to pay flat 30% as income tax on the income generated A sole proprietorship can use the slab rates while computing their income tax.
Growth prospects An LLP can expand by opening branch offices in different states.  A sole proprietorship can only expand if it registers the same individually in different states

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