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Shall I go for LLP or Private limited company? Advise me su

suresh N (accountant) (25 Points)

13 February 2011

I have started a small software firm on 2005 end and I am running the firm with few employees with my wife. And I want to go for incorporation…
Our yearly turnover is bellow 10lakhs so we are not paying service tax till now. If I am going Pvt Ltd registration this will be affected or what?
I want to go for incorporation for the reputation, avail the marketing benefits.

Shall I go for LLP or Private limited company? Advise me suitably…..

Thanks and Regards
Suresh N.

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11 Replies

SAMAR JEET SINGH (CA) (72 Points)
Replied 13 February 2011

Some comparisions

1. Formation cost: the cost of Formation of LLP is lesser that of formation of Company.

2. Taxation : No noticfication yet from the department for the LLP whereas Company Flat rate of 30% Plus surcharge as applicable.

3. Compliance: Compared to the normal partnership LLP is better reputed as it is regulated and formed under the llp act. whereas Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness.

1 Like

SUCHINDRA PARE (Lawyer) (80 Points)
Replied 13 February 2011

AGREED WITH SAMAR

CREDITWORTHINESS OF THE COMPANY IS HIGHER AS COMPARED TO LLP DUE TO STRINGENT COMPLIANCES AND DISCLOSURES.

BELOW IS THE LINK DIFFERENTIATING BETWEEN THE PARTNERSHIP LLP AND THE COMPANY.

https://www.llponline.in/compare_llp_result.php

REGARDS.

Sudipto Mukherjee ( Company Secretary) (192 Points)
Replied 13 February 2011

From Taxation (income tax) point of view LLP are better as compared to Company .

One point has to kept in mind that holding property in the name of LLP is big problem because our Registration Act does not recognises LLP as an entity.

If you are looking for marketing benefits, in my opinion Company will be a better.

2 Like

SIDHARTH DHIR (senior articled assistant) (623 Points)
Replied 14 February 2011

AGREE TO Mr MUKHERJEE

shashi (Acct. Manager) (28 Points)
Replied 14 February 2011

Even if you are going for LLP or Pvt. Ltd. Co., liability for registration under service tax would be only if your TO exceed rs. 10 lacs in a fin. year.

As far as choosing between LLP or Pvt. Ltd. Co., you may go for pvt. ltd. co. since it will be give more recognition in the market than LLP.

regards

Gajendra Saini (CA final student.) (185 Points)
Replied 14 February 2011

hello,

In a broader view, you should corporate it as a pvt ltd company. May be it is possible that this time your concern is small size, but in future your concern takes more goodwill as spend with time and the business of your concern became wide. At that time, you and your associate partners/ members coultnot control and manage it properly. So, you will corporate it as a company.

On the other hand, the extra benefit is also for the same that is the company has more goodwill and good image in corporate market then a Partnership firm/ Limited Liability Partnership.

Ashish Kedia (CA) (737 Points)
Replied 14 February 2011

Dear Suresh,

As of now your firm is very small, LLP is the best recommended structure if you want to give a more formal recognition to your firm and is relatively hassle free as compared to an incorprated company. The expenses of formation and post incorporation of a LLP is less as compared to a Pvt Ltd company. Also managing a company requires a lot more professionalism and compliance compared to LLP. However much would also depend upon how you want ur organisation to be perceived in the market and what form of organisation structure is preferred by your vendors. If that is not a problem LLP is the best structure as it is also more tax efficient under Income Tax. However, if you are eyeing listing or such kind of market recognition, obviously Pvt Ltd company is advisable.

One thing that you need to keep in mind is that conversion from LLP to a Pvt. Ltd. company is not possible as per current scheme of law. Hence you should only go for LLP if you have no plans to convert it to a Pvt Ltd co in the next 3 years atleast.

As regards service tax, choice between LLP or Pvt Ltd company does not affect service tax liability and thus you do not need to pay service tax until your T/o crosses 10 lacs.

Mohit Garg (CS) (178 Points)
Replied 15 February 2011

as per my understanding LLP is better option than a pvt. ltd. co.

above views are also good. BUT LLP is new concept and i have seen many big pvt. cos. (legal firms) have changed its status to LLP.

Less Compliances/formalities in comparision to Pvt. Ltd. Co.

Regarding conversion of LLP into Pvt. ltd. co., in my view if at any stage you want a pvt. ltd. co. you just need to incorporate a pvt. ltd. co. and acquire LLP not an issue.

Rest depends upon your requirement.

Best Wishes,

Mohit

KSHITIJ (NA) (35 Points)
Replied 07 December 2011

Dear Sir

LLP DOES HAVE AN EDGE OVER PVT. LTD. IN TERMS OF COST BUT THERE ARE A LOT MORE DRAWBACKS WHICH MAKE LLP EXPENSIVE IN TERMS OF ITS OPPORTUNITY COST. A PVT. LTD. COMPANY CAN HAVE 50 MEMBERS EXCLUDING ITS EMPLOYEES AND PAST EMPLOYEES WHILE AN LLP CAN HAVE LIMITED PARTNERS. A COMPANY HAVE A HIGHER CREDITWORTHINESS WHICH MAKES IT MORE ATTRACTIVE FOR BOTH THE SUPPLIERS AND THE CUSTOMERS. THERE ARE NO GREATER TAX BENEFITS IN INCOME TAX ACT FOR AN LLP THAN A COMPANY. IF YOU PLAN TO TAKEOVER YOUR LLP IN THE NEW COMPANY, THEN WHAT IS THE BENEFIT OF DOING SO, FIRST SPENDING MONEY IN INCORPORATINF LLP, THEN HAVING AN AGREEMENT FOR TAKEOVER AND THEN PAYING FEE FOR COMPANY INCORPORATION. IF YOU DREAM BIG YOU SHALL GET BIG.

FROM MY POINT OF VIEW THERE ARE NO LESS FORMALITIES, YOU HAVE TO PREPARE ANNUAL STATEMENTS, YOU HAVE TO ACQUIRE DPIN, DIGITAL SIGNATURES. ONLY FILING CERTAIN ADDITIONAL RESOLUTIONS IS WHAT WOULD HAVE TO DO ADDITIONALLY.

ALSO YOU CAN'T ACQUIRE A PROPERTY IN THE NAME OF LLP. YOU HAVE TO DO IT IN THE NAME OF A PARTNER AND IN CASE OF DIFFERENCES BETWEEN THE PARTNERS IT WOULD CREATE PROBLEMS. HOWEVER IN A PVT. LTD. COMPANY YOU HAVE A CONTROL EQUAL TO THE NUMBER OF SHARES YOU POSSESS. ALSO THERE ARE POSSIBILITIES OF DIFFERENTIAL RIGHTS.

yashsr (CA) (2285 Points)
Replied 02 June 2012

Originally posted by : Sudipto Mukherjee
	One point has to kept in mind that holding property in the name of LLP is big problem because our Registration Act does not recognises LLP as an entity.

Is it still the case? Can you please elaborate? I'm planning to start a LLP and want to either purhcase property or lease it. Will I have problems doing the same in LLPs name?