Partnership V/s Private Limited
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 June 2010
Situation: Planning to do more than one business , which is more beneficial?
And tell me full advantages of Pvt. Company and partnership?
And tell me full advantages of Pvt. Company and partnership?
08 June 2010
A private limited company is a voluntary association of not less than two and not more than fifty members, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures. Its main features are :-
* It has an independent legal existence. The Indian Companies Act,1956 contains the provisions regarding the legal formalities for setting up of a private limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.
* It is relatively less cumbersome to organise and operate it as it has been exempted from many regulations and restrictions to which a public limited company is subjected to. Some of them are :-
o it need not file a prospectus with the Registrar.
o it need not obtain the Certificate for Commencement of business.
o it need not hold the statutory general meeting nor need it file the statutory report.
o restrictions placed on the directors of the public limited company do not apply to its directors.
* The liability of its members is limited.
* The shares allotted to it's members are also not freely transferable between them. These companies are not allowed to invite public to subscribe to its shares and debentures.
* It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it.
Hence, a private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business.
Advantages
* Continuity of existence
* Limited liability
* Less legal restrictions
Disadvantages
* Shares are not freely transferable
* Not allowed to invite public to subscribe to its shares
* Scope for promotional frauds
* Undemocratic control
* It has an independent legal existence. The Indian Companies Act,1956 contains the provisions regarding the legal formalities for setting up of a private limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.
* It is relatively less cumbersome to organise and operate it as it has been exempted from many regulations and restrictions to which a public limited company is subjected to. Some of them are :-
o it need not file a prospectus with the Registrar.
o it need not obtain the Certificate for Commencement of business.
o it need not hold the statutory general meeting nor need it file the statutory report.
o restrictions placed on the directors of the public limited company do not apply to its directors.
* The liability of its members is limited.
* The shares allotted to it's members are also not freely transferable between them. These companies are not allowed to invite public to subscribe to its shares and debentures.
* It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it.
Hence, a private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business.
Advantages
* Continuity of existence
* Limited liability
* Less legal restrictions
Disadvantages
* Shares are not freely transferable
* Not allowed to invite public to subscribe to its shares
* Scope for promotional frauds
* Undemocratic control
Message likes :
8 times
08 June 2010
Advantages of Partnership:
Easy to form:
Like sole proprietorships, partnership businesses can be formed easily without any compulsary legal formalities. It is not necessary to get the firm registered. A simple agreement or parnership deed, either oral or in writing, is sufficient to create a partnership.
Note: Registration of the parnership is voluntary in most states. However it would be best to check up the rules of your state to be sure. In states like Maharashtra, registration is almost compulsory.
Availability of large resources:
Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business.
Better decisions:
The partners are the owners of the business. Each of them has equal right to participate in the management of the business. In case of any conflict, they can sit together to solve the problem. Since all partners participate in the decision-making process, there is less scope for reckless and hasty decisions.
Flexibility in operations:
A partnership firm is a flexible organization. At any time, the partners can decide to change the size or nature of the business or area of it’s operation. There is no need to follow any legal procedure. Only the consent of all the partners is required.
Sharing risks:
In a partnership firm all the partners “share” the business risks. For example, if there are three partners and the firm makes a loss of Rs.12,000 in a particular period, then all partners may share it and the individual burden will be Rs.4000 only. Because of this, the partners may be encouraged to take up more risk and hence expand their business more.
Protection of interest of each partner:
In a partnership firm, every partner has an equal say in decision making and the management of the business. If any decision goes against the interest of any partner, he can prevent the decision from being taken. In extreme cases an unsatisfied partner may withdraw from the business and can dissolve it. In such extreme cases the “partnership deed” is required. In absence of the partnership deed, no legal protection is given to the partners.
Benefits of specialization:
Since all the partners are owners of the business, they can actively participate in every aspect of business as per their specialization, knowledge and experience. If you want to start a firm to provide legal consultancy to people, then one partner may deal with civil cases, one in criminal cases, and another in labor cases and so on as per the individual specialization. Similarly, two or more doctors of different specialization may start a clinic in partnership.
Disadvantages of Partnership:
Unlimited liability:
All the partners are jointly liable for the debt of the firm. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners.
Uncertain life:
The partnership firm has no legal existance separate from it’s partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership.
Lack of harmony:
In a partnership firm every partner has an equal right to participate in the management. Also, every partner can place his or her opinion or viewpoint before the management regarding any matter at any time. Because of this, sometimes there is a possibility of friction and discontent among the partners. Difference of opinion may lead to the end of the parnership and the business.
Limited capital:
Since the total number of partners cannot exceed 20, the capital to be raised is always limited. It may not be possible to start a very large business in partnership form.
No transferability of share:
If you are a partner in any firm, you cannot transfer your share or part of the company to outsiders, without the consent of other partners. This creates inconvenience for the partner who wants to leave the firm or sell part of his share to others.
Easy to form:
Like sole proprietorships, partnership businesses can be formed easily without any compulsary legal formalities. It is not necessary to get the firm registered. A simple agreement or parnership deed, either oral or in writing, is sufficient to create a partnership.
Note: Registration of the parnership is voluntary in most states. However it would be best to check up the rules of your state to be sure. In states like Maharashtra, registration is almost compulsory.
Availability of large resources:
Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business.
Better decisions:
The partners are the owners of the business. Each of them has equal right to participate in the management of the business. In case of any conflict, they can sit together to solve the problem. Since all partners participate in the decision-making process, there is less scope for reckless and hasty decisions.
Flexibility in operations:
A partnership firm is a flexible organization. At any time, the partners can decide to change the size or nature of the business or area of it’s operation. There is no need to follow any legal procedure. Only the consent of all the partners is required.
Sharing risks:
In a partnership firm all the partners “share” the business risks. For example, if there are three partners and the firm makes a loss of Rs.12,000 in a particular period, then all partners may share it and the individual burden will be Rs.4000 only. Because of this, the partners may be encouraged to take up more risk and hence expand their business more.
Protection of interest of each partner:
In a partnership firm, every partner has an equal say in decision making and the management of the business. If any decision goes against the interest of any partner, he can prevent the decision from being taken. In extreme cases an unsatisfied partner may withdraw from the business and can dissolve it. In such extreme cases the “partnership deed” is required. In absence of the partnership deed, no legal protection is given to the partners.
Benefits of specialization:
Since all the partners are owners of the business, they can actively participate in every aspect of business as per their specialization, knowledge and experience. If you want to start a firm to provide legal consultancy to people, then one partner may deal with civil cases, one in criminal cases, and another in labor cases and so on as per the individual specialization. Similarly, two or more doctors of different specialization may start a clinic in partnership.
Disadvantages of Partnership:
Unlimited liability:
All the partners are jointly liable for the debt of the firm. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners.
Uncertain life:
The partnership firm has no legal existance separate from it’s partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership.
Lack of harmony:
In a partnership firm every partner has an equal right to participate in the management. Also, every partner can place his or her opinion or viewpoint before the management regarding any matter at any time. Because of this, sometimes there is a possibility of friction and discontent among the partners. Difference of opinion may lead to the end of the parnership and the business.
Limited capital:
Since the total number of partners cannot exceed 20, the capital to be raised is always limited. It may not be possible to start a very large business in partnership form.
No transferability of share:
If you are a partner in any firm, you cannot transfer your share or part of the company to outsiders, without the consent of other partners. This creates inconvenience for the partner who wants to leave the firm or sell part of his share to others.
08 June 2010
I will also suggest you to consider forming LLP. ADVANTAGES OF LLP:
• Separate legal entity
• Easy to establish
• Flexibility without imposing detailed legal and procedural requirements
• Perpetual existence irrespective of changes in partners
• Internationally renowned form of business in comparison to Company
• No requirement of minimum capital contribution
• No restrictions as to maximum number of partners
• LLP & its partners are distinct from each other
• Partners are not liable for Act of other partners.
• Personal assets of the partners are not exposed except in case of fraud.
• Easy to dissolve or wind-up
• Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP
• No requirement to maintain statutory records except Books of Accounts
• Less Cost of formation (Compared to a company)
• Separate legal entity
• Easy to establish
• Flexibility without imposing detailed legal and procedural requirements
• Perpetual existence irrespective of changes in partners
• Internationally renowned form of business in comparison to Company
• No requirement of minimum capital contribution
• No restrictions as to maximum number of partners
• LLP & its partners are distinct from each other
• Partners are not liable for Act of other partners.
• Personal assets of the partners are not exposed except in case of fraud.
• Easy to dissolve or wind-up
• Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP
• No requirement to maintain statutory records except Books of Accounts
• Less Cost of formation (Compared to a company)
Message likes :
2 times
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 June 2010
Which form do you sugest in the given situation?
08 June 2010
Please give details of business, size of business, investment of capital to be made and no of persons joining hand etc.
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 June 2010
Can you give me the procedures to form LLP?
08 June 2010
Please visit:
http://www.llp.gov.in/
http://www.llponline.in/
http://www.llp.gov.in/
http://www.llponline.in/
Message likes :
1 times
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 June 2010
Details of business: Software,Hardware and real estate
Size of business: Small scale
Investment of capital to be made: Not more than One Lakh
No. of persons joining hand : 5 persons
Size of business: Small scale
Investment of capital to be made: Not more than One Lakh
No. of persons joining hand : 5 persons
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 June 2010
Details of business: Software,Hardware and real estate
Size of business: Small scale
Investment of capital to be made: Not more than One Lakh
No. of persons joining hand : 5 persons
Size of business: Small scale
Investment of capital to be made: Not more than One Lakh
No. of persons joining hand : 5 persons
08 June 2010
SINCE INVESTMENT AMOUNT IS LESS I WILL SUGGEST PARTNERSHIP, SINCE LLP WILL REQUIRE MORE COMPLIANCE WORK.
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