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Proprietorship vs partnership vs llp vs private limited comp


Arpit Shah (Accountant)     25 November 2014

Arpit Shah
Accountant 
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Proprietorship vs Partnership vs LLP vs Private Limited Company vs OPC

Selection of business entity is among 0the first legal decision taken by an Entrepreneur while starting a new business. With the introduction of the Limited Liability Partnership Act and the Companies Act, 2013, more choices of business entities are now available. Therefore, it is important for the Entrepreneur or Promoter to understand the pros and cons of each of the business entity and choose the right one. Among the choice of For-Profit entities available like Proprietorship, Partnership, Limited Liability Partnership, One Person Company, Private Limited Company and Limited Company, a few are ideal for most Entrepreneurs. In this article, we compare those types of entities viz. Proprietorship vs Partnership vs LLP vs Private Limited Company vs One Person Company.


Registration


Proprietorship

There is no formal registration for Proprietorship.

Partnership

Partnership can be registered or unregistered. Registration of Partnership is optional. If registered, Partnership is registered under the Partnership Act, 1932.

LLP

LLP will be registered with the Ministry of Corporate Affairs under the Limited Liability Partnership Act, 2008.

Private Limited Company

Private Limited Company will be registered with the Ministry of Corporate Affairs under the Companies Act, 2013.

One Person Company

One Person Company will be registered with the Ministry of Corporate Affairs under the Companies Act, 2013.


Name of the Entity


Proprietorship

The Promoter’s choice of name can be used for the Proprietorship. No approval is necessary for using name; however, it is good to avoid trademarked names.

 

Partnership

The Promoters choice of name can be used for the Partnership. No approval is necessary for using name; however, it is good to avoid trademarked names.

LLP

The choice of name provided by the Promoter must be approved by the Registrar of Company. Only names that are not identical / similar to an existing company or LLP name and names that are not offensive or illegal would be allowed. The name of the entity will end with the words “Limited Liability Partnership” or “LLP”.

Private Limited Company

The choice of name provided by the Promoter must be approved by the Registrar of Company. Only names that are not identical / similar to an existing company or LLP name and names that are not offensive or illegal would be allowed. The name of the entity will end with the words “Private Limited Company”.

One Person Company

The choice of name provided by the Promoter must be approved by the Registrar of Company. Only names that are not identical / similar to an existing company or LLP name and names that are not offensive or illegal would be allowed. The name of the entity will end with the words “OPC” or “One Person Company”.


Legal Status of Entity


Proprietorship

Proprietorship is not recognised as a separate legal entity and the promoter is personally liable for the liabilities of the Proprietorship.

 

Partnership

Partnership is not recognised as a separate legal entity and the promoters are personally liable for the liabilities of the partnership.

LLP

LLP is a separate legal entity registered under the LLP Act, 2008. The partners of a LLP are not personally liable for the liabilities of the LLP.

Private Limited Company

Private Limited Company is a separate legal entity registered under the Companies Act, 2013. The Directors and Shareholders of a Private Limited Company are not personally liable for the liabilities of the Company.

One Person Company

One Person Company is a separate legal entity registered under the Companies Act, 2013. The Director and Nominee Director of a One Person Company are not personally liable for the liabilities of the Company.


Member(s) Liability


Proprietorship

Proprietor has unlimited liability and is responsible for all the liabilities of the Proprietorship.

Partnership

Partners have unlimited liability and is responsible for all the liabilities of the Partnership.

LLP

Partners have limited liability and is liable only to the extent of their contribution to the LLP.

Private Limited Company

Shareholders have limited liability and is liable only to the extent of their share capital.

One Person Company

Director and Nominee Director have limited liability and is liable only to the extent of his/her share capital.


Minimum Number of Members


Proprietorship

Can have only one person as member.

Partnership

A minimum of two persons are required to start a Partnership.

LLP

A minimum of two persons are required to start a LLP.

Private Limited Company

A minimum of two persons are required to start a Private Limited Company.

One Person Company

A minimum of two persons are required to start a One Person Company, viz. Director and Nominee Director.


Maximum Number of Members


Proprietorship

Can have only one person as member.

Partnership

The maximum number of partners can be only 20.

LLP

A LLP can have unlimited number of Partners.

Private Limited Company

A Private Limited Company can only have a maximum of 200 shareholders or members.

One Person Company

A One Person Company can have only two people, viz. Director and Nominee Director.


Foreign Ownership


Proprietorship

Foreigners are not allowed to start a Proprietorship.

Partnership

Foreigners are not allowed to start a Partnership.

LLP

Foreigners are allowed to invest in a LLP only with prior approval of Reserve Bank of India and Foreign Investment Promotion Board (FIPB) approval.

Private Limited Company

Foreigners are allowed to invest in a Private Limited Company under the Automatic Approval route in most sectors.

One Person Company

Director and Nominee Director cannot be Foreigners.


Transferability


Proprietorship

Not transferable.

Partnership

Not transferable.

LLP

Ownership can be transferred.

Private Limited Company

Ownership can be transferred by way of SHARE transfer.

One Person Company

Ownership can be transferred.


Existence or Survivability


Proprietorship

Existence of a Proprietorship business is dependent on the Proprietor.

Partnership

Existence of a Partnership business is dependent on the Partners. Could be up for dissolution due to death of a Partner.

LLP

Existence of a LLP is not dependent on the Partners. Could be dissolved only voluntarily or by an Order of the Company Law Board.

Private Limited Company

Existence of a Private Limited Company is not dependent on the Directors or Shareholders. Could be dissolved only voluntarily or by Regulatory Authorities.

One Person Company

Existence of a One Person Company is not dependent on the Director or Nominee Director. Could be dissolved only voluntarily or by Regulatory Authorities.


Taxation


Proprietorship

Taxed as individual, based on the total income of the Proprietor.

Partnership

Partnership profits are taxed at 30% plus surcharge and cess as applicable.

LLP

LLP profits are taxed at 30% plus surcharge and cess as applicable.

Private Limited Company

Private Limited Company profits are taxed at 30% plus surcharge and cess as applicable.

One Person Company

One Person Company profits are taxed at 30% plus surcharge and cess as applicable.


Annual Statutory Meetings


Proprietorship

No requirements to conduct annual statutory meetings.

Partnership

No requirements to conduct annual statutory meetings.

LLP

No requirements to conduct annual statutory meetings.

Private Limited Company

Board and General Meetings must be conducted periodically.

One Person Company

No requirements to conduct annual statutory meetings.


Annual Filings


Proprietorship

No requirements to file annual report with Registrar of Companies. Income Tax Return must be filed based on the income of the Proprietorship.

Partnership

No requirements to file annual report with Registrar of Companies. Income Tax Return must be filed for the Partnership.

LLP

LLP must file Annual Statement of Accounts & Solvency and Annual Return with the Registrar each year. Income Tax Return must also be filed for the LLP.

Private Limited Company

Private Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies each year. Income Tax Return must also be filed for the Private Limited Company.

One Person Company

One Person Company must file Annual Accounts and Annual Return with the Registrar of Companies each year. Income Tax Return must also be filed for the One Person Company.


Registration Cost


Proprietorship

IndiaFilings offers Proprietorship Registration at an all inclusive price of Rs.6,000/-

Partnership

IndiaFilings offers Partnership Registration at an all inclusive price of Rs.6,000/-

LLP

IndiaFilings offers LLP Registration at an all inclusive price of Rs.8000/-

Private Limited Company

IndiaFilings offers Private Limited Company Registration at an all inclusive price of Rs. of Rs.16,000/-

One Person Company

IndiaFilings offers One Person Company Registration at an all inclusive price of Rs. of Rs.16,000/-

3 Like
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CA Saloni (Deputy Manager-Accounts & GST Consultant)     25 November 2014

CA Saloni
Deputy Manager-Accounts & GST Consultant 
 415 likes  4910 points

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Nice Article....

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Eaga Mariyappan (Others)     18 September 2015

Eaga Mariyappan
Others 
 1 likes  14 points

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Nice article yes.Thank you smiley.

I like to add some more points.

Limited Liability Partnership (LLP):

A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liabilities.

General Partnership:

A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests.

 

Sole Proprietorship:

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business.

Private Limited Company :

A private limited company (LTD) is a business that is unable to float its shares on the stock exchange, however it may issue its shares to friends, family and employees.
 

 

SamSue (Partner)     19 December 2016

SamSue
Partner 
 1 likes  52 points

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Nice article and very good summary.  Consider an existing Partnership firm. If you could, I would appreciate your inputs regarding the below points:

  1. How would the banks and other financial institutiions view Partnership vs LLP vs Private Limited company if it has to raise more funds for growth?
  2. Process and common challenges faced to transition from Partnership to LLP or Private Limited company
  3. Merits/demerits to partners (salary, company car lease, etc.) if current entity is changed to LLP or Private Limited company

Thanks and Regards,

SamSue

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Tejaswi Kumar Singh   01 June 2017

Tejaswi Kumar Singh

 8 points

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That was a nice piece of content. It contains great knowledge. Although there are few things that should be considered when comparing these business types with each other.

There are many restrictions as well as benefits on the conversion of these business types into one and other. And they also have different procedure to get the same name. 

 

CA Viswanathan (Chartered Accountant in Practise)     21 February 2019

CA Viswanathan
Chartered Accountant in Practise 
 7 likes  269 points

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Company Registration procedure change for 2019 and updates on Private Limited Company Registration process

Ananya Nair (Financial )     16 April 2019

Ananya Nair
Financial  
 33 likes  1092 points

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Nice article and very good information summary and New Updates on Private Limited Company Registration process.

 

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Neeraj Bora   19 September 2019

Neeraj Bora

 1 likes  9 points

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Thanks for sharing good information. If you want to know Types of Private Limited Company & advantages of Private Limited Company visit CAONWEB BLOG.

 



 


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