Access to profits/capital in llp vs. pvt. ltd.

This query is : Resolved

MMM (Querist)
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08 March 2014 I need to create a limited liability entity to run a business and am trying to decide whether to go with an LLP or a Pvt. Ltd. One of my major considerations is to have a structure that allows me to have easy access to the use the profits that will be generated in the business. Since this business will be the only source of income for me, it is important that I be able to use the money that is earned for business as well as personal requirements.

From what I understand, the only tax efficient way to take money out from a Pvt. Ltd. is by way of salary. Dividend leads to double taxation and a buyback of shares by an unlisted company would attract capital gains. Compared with this, in an LLP, although remuneration is limited, one can withdraw capital/accrued profits when required and also charge an interest on capital.

Would like to know if I am missing anything and any other inputs that would help me make a better decision. Also, as far as remuneration (salary + commission) to directors in a Pvt. Ltd. is concerned, are there any upper limits or is it left to an assessing officer to decide if the remuneration is reasonable. For e.g., if the profit after all expenses but before Directors remuneration is Rs. 1,00,00,000, what is the maximum that a Director can take as remuneration without attracting the ire of the IT department.

Please note that all Directors/Partners will be family members.

Thanks in advance.