TAXAJ

Comparison between Company,
LLP, 
Firms 
& Others

Before starting any business, a businessman first thinks about how they can start the business. The nature and complexity involved in different business formation are different. Hence the businessman has to choose the nature very carefully by thinking about the nature of business/profession, going concern analysis, brand image, area of operation, financial condition and independence. Your first decision will decide the future of the organisation.

Keeping in mind most of the varying scenarios, here we have discussed few important comparisons between:

Private Limited Company V/s Public Limited Company
Private Limited Company V/s Limited Liability Partnership
Private Limited Company V/s Partnership Firm
Private Limited Company V/s Proprietorship Firm
Partnership Firm V/s Proprietorship Firm
Partnership Firm V/s Limited Liability Partnership
 Basis Proprietorship Firm  Partnership Firm Private Limited CompanyLimited Liability Partnership
Prevailing LawNo such law for this.Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made thereunder
Companies are prevailed by ‘Companies Act, 2013’Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made thereunder
 Capital RequiredNo minimum amount No minimum amount No minimum amount, Standard 1 Lakh No minimum amount
 Time to Launch 3 to 5 working days 7 to 10 working days 3 to 5 working days 15 to 20 working days
 Name of Entity Any name as per choice Any name as per choice Name to contain ‘Private Limited’ in case of Private Company as suffix Name to contain ‘Limited Liability Partnership’ or ‘LLP’ as suffix.
Procedure→Arrange KYC of Proprietor
 →Apply Tax Registration
→Approval and Ready.
→Arrange KYC of All Partners
→Prepare, Sign & Notarise Partnership Deed
→Apply to Registrar of Firms
→Apply Pan Card 
→Approval, Pan Generated & Ready
→Arrange KYC of All Directors
→Apply for Digital Signature  of Directors
→Apply for DIN of Directors
→Apply for RUN for Name Approval
→Prepare MOA, AOA & Other Incorporation Documents
→File SPice+ with MCA
→Approval with COI, PAN, TAN & GST
→Arrange KYC of All Partners
→Apply for Digital Signature  of Partners
→Apply for DIN of Partners
→Apply for Name Approval with Form 1

→Prepare Partnership Agreement & Other Incorporation Documents
→File Form 2 & 3 with MCA
→Approval with COI, PAN, TAN & GST
 Pre-Approval of Name Not Required Not Required Required Required
Registration Any Tax Registration will suffice Optional with Registrar of Firms Registration with Registrar of ROC required (MCA) Registration with Registrar of LLP required (MCA)
 Creation N/A Created by contract with 2 persons Created by Law  Created by Law
 Distinct Entity Not a separate legal entity Not a separate legal entity Is a separate legal entity under the Companies Act, 2013 Is a separate legal entity under the Limited Liability Partnership Act, 2008
 Cost of FormationINR  2,500 - 5,000 INR  5,500 - 10,500 INR  12,500 - 15,000 INR  8500 - 11,500
 Perpetual Succession It does not have perpetual succession as this depends upon Proprietor. It does not have perpetual succession as this depends upon the will of Partners. It has perpetual succession and members may come and go. It has perpetual succession and members may come and go.
 Charter Document N/A Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partnersMemorandum and Article of Association is the charter of the company that defines its scope of operationsLLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP
 Common Seal There is no concept of common seal. There is no concept of common seal. It denotes the authentication of the company and every company shall have its own common seal It denotes the authentication and LLP may have its own common seal, dependant upon the terms of the Agreement
Formalities of IncorporationAny Government Tax or License Registration will suffice. In case of registration, Partnership Deed along with form / affidavit required to be filed with Registrar of firms along with requisite filing fee
Various e-forms along the Memorandum & Articles of Association are filed with Registrar of Companies with prescribed fees  Various e-forms are filed with Registrar of LLP with prescribed fees
Foreign Participation Foreign Nationals can not form Proprietorship Firm in India Foreign Nationals can not form Partnership Firm in India Foreign Nationals can be a member in a Company Foreign Nationals can be a Partner in a LLP
 Number of Members One Minimum 2 and Maximum 20 Minimum 2 and Maximum 200 Minimum 2 partners and there is no limitation of maximum number of partners.
Ownership of Assets Proprietor shall be the owner of any assets. Partners have joint ownership of all the assets belonging to partnership firm The company independent of the members has ownership of assetsThe LLP independent of the partners has ownership of assets
Legal ProceedingsCan sue the parties on Individual basis. Only registered partnership can sue third party A company is a legal entity which can sue and be sued A LLP is a legal entity can sue and be sued
 Liability of Partners/Members Unlimited, being the single owner. Unlimited. Partners are severally and jointly liable for actions of other partners and the firm and liability extend to their personal assets.Generally limited to the amount required to be paid up on each share. Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner.
Tax Liability As per Individual Tax Slab. Income of Partnership is taxed at a Flat rate of 30% plus education cess as applicable. Income of Company is Taxed at a Flat rate of 30% Plus surcharge as applicable. Income of LLP is taxed at a Flat rate of 30% plus education cess as applicable.
 Principal/Agent Relationship Proprietor is the sole contact person Partners are agents of the firm and other partners. The directors act as agents of the company and not of the members Partners act as agents of LLP and not of the other partners.
Transfer / Inheritance of Rights Not transferable. In case of death the legal heir inherits the business Not transferable. In case of death the legal heir receives the financial value of share. Ownership is easily transferable. Regulations relating to transfer are governed by the LLP Agreement
 Transfer of Share / Partnership rights in case of deathNot transferable
 In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners In case of death of member, shares are transmitted to the legal heirs.In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners
 Director Identification Number Not requiredThe partners are not required to obtain any identification number Each director is required to have a Director Identification Number before being appointed as Director of any company. Each Designated Partners is required to have a DPIN before being appointed as Designated Partner of LLP.
 Digital Signature  Optional for better experience. There is no requirement of obtaining Digital Signature As e-forms are filled electronically, at least one Director should have Digital SignaturesAs e-forms are filled electronically, at least one Designated Partner should have Digital Signatures.
 Dissolution By simply cancelling the tax registration. By agreement, mutual consent, insolvency, certain contingencies, and by court order.Voluntary or by order of National Company Law Tribunal. Voluntary or by order of National Company Law Tribunal.
Admission as Partner/Member Not Possible A person can be admitted as a partner as per the partnership Agreement A person can become member by buying shares of a company.A person can be admitted as a partner as per the LLP Agreement
Cessation as Partner/Member Not Possible A person can cease to be a partner as per the agreement. A member / shareholder can cease to be a member by selling his shares. A person can cease to be a partner as per the LLP Agreement or in absence of the same by giving 30 days prior notice to the LLP
Managerial Personnel No requirement of any managerial; personnel , proprietors themselves administer the businessNo requirement of any managerial; personnel , partners themselves administer the business Directors are appointed to manage the business and other statutory compliances on behalf of the members. Designated Partners are responsible for managing the day to day business and other statutory compliances.
 Statutory Meetings There is no provision in regard to holding of any meeting There is no provision in regard to holding of any meeting Board Meetings and General Meetings are required to conducted at appropriate time.There is no provision in regard to holding of any meeting.
Maintenance of Minutes There is no concept of any minutesThere is no concept of any minutes The proceedings of meeting of the board of directors / shareholders are required to be recorded in minutes.A LLP by agreement may decide to record the proceedings of meetings of the Partners/Designated Partners
Voting Rights Not Applicable It depends upon the partnership Agreement Voting rights are decided as per the number of shares held by the members. Voting rights shall be as decided as per the terms of LLP Agreement.
Remuneration of Managerial Personnel Proprietor can withdraw as per his need The firm can pay remuneration to its partners Company can pay remuneration to its Directors subject to law. Remuneration to partner will depend upon LLP Agreement.
 ContractsProprietors are free to enter into any contract. Partners are free to enter into any contract.Restrictions on Board regarding some specified contracts, in which directors are interested.Partners are free to enter into any contract.
Books of Account Required to maintain books of accounts
  Required to maintain books of accounts as Tax laws Required to maintain books of accounts, statutory registers, minutes etc.Required to maintain books of accounts.
 Annual Filing No return is required to be filed with Registrar of Firms No return is required to be filed with Registrar of FirmsAnnual Financial Statement and Annual Return is required to be filed with the Registrar of Companies every year. Annual Statement of accounts and Solvency & Annual Return is required to be filed with Registrar of Companies every year.
Share CertificateNot Applicable  The ownership of the partners in the firm is evidenced by Partnership Deed, if any. Share Certificates are proof of ownership of shares held by the members in the Company The ownership of the partners in the firm is evidenced by LLP Agreement.
Audit of Accounts  Proprietorship Firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act Partnership firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act Companies are required to get their accounts audited annually as per the provisions of the Companies Act, 2013 All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008.
Accounting StandardsNo Accounting Standards are applicable No Accounting Standards are applicable Companies have to mandatorily comply with accounting standards The necessary rules in regard to the application of accounting standards are not yet issued.
Merger-Amalgamation Proprietorship cannot merge with other firm or enter into compromise or arrangement with creditors or partners Partnership cannot merge with other firm or enter into compromise or arrangement with creditors or partnersCompanies can enter into Compromise / arrangements / merger / amalgamationLLP’s can enter into Compromise / arrangements / merger / amalgamation
 Oppression and Mismanagement Not Applicable due to single ownership. No remedy exist , in case of oppression of any partner or mismanagement of Partnership Provisions providing for remedy against Oppression and mismanagement existsNo provision relating to redressal in case of oppression and mismanagement
 Credit Worthiness of Organization Credit worthiness of firm depends upon goodwill and creditworthiness of its Proprietor Credit worthiness of firm depends upon goodwill and creditworthiness of its Partners Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness.Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company.
Conversion Can be Converted to Private Limited CompanyRegistered Firms  Can be Converted to LLP Can be Converted to Public Limited CompanyCan be Converted to Private Limited Company 
Start Up India  In-Eligible In-Eligible Eligible Eligible
 Dividend Distribution Tax Not Applicable Not Applicable ApplicableNot Applicable
 Compliances State or Central Tax
Income Tax
  State or Central Tax
Income Tax
State or Central Tax
Income Tax
MCA
TDS
 State or Central Tax
Income Tax
MCA
TDS
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