Private Limited Company (PLC) and Limited Liability (Partnership) Company (LLC/ LLP) have a lot of common factors, but they are a little different in terms of the organization structure and its features. Both PLC and LLP/ LLC are privately owned only and cannot have public stocks/shares.
However, if one needs to have external funding like Venture Capitalists (VCs) to boost the annual turnover, then it is apt to be registered as Private Limited; whereas if one needs to restrict and would like to have a closely knitted structure and to have a start-up company then LLC/ LLP registration could be the better choice. Before we understand more about the key differences between the two structures, let us understand the definition of both the nomenclatures in brief.
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LLP is a combination of both Company and Partnership. It is especially suitable for small to medium-sized business enterprises.
It is governed by Limited Liability Partnership Act- 2008 which came into force from April 1, 2008. This Act was proposed for promoting the Micro Small Medium Enterprise.
LLP registration has the advantage of self-governance and less compliance as compared to other types of corporate entities.
The minimum number of designated partners for the incorporation of an LLP is two. One of them must be an Indian resident. Currently, DIN is only allotted only at the time of incorporation or while adding a person as a director or designated partner in a company or an LLP. Hence, first such members need to be added as directors in the company to obtain DIN. DIN will be required for those who would become designated partners.
Further, it is important to apply for a DSC before applying for the DIN. A Body Corporate can also be a partner in a Limited Liability Partnership through a nominee.
The company will have to apply for reservation of name of LLP And GET NAME APPROVAL CERTIFICATE FROM ROC.
File E Form FiLLiP with ROC along with following Attachments:
Form 18 is the form for conversion of a company into an LLP. But it needs to be filed with Form for incorporation itself.
This form has information about the conversion of the company into LLP such as:
After complying to all the formalities by the company and approved by the Ministry, ROC to issues a COI as to the conversion of LLP.
Contents of Agreement are:
This form provides information about the LLP Agreement entered into between the partners. This form is to be filed in 30 days from the date of conversion of the company into an LLP.
Attachment Required: LLP Agreement
After receiving incorporation certificate of LLP it has to be filed within 15 days of the date of conversion.
ATTACHMENTS OF E-FORM 14
It is best to know everything about Limited Liability Partnership in India including the effects on taxation after conversion. The conversion of Company into an LLP will not attract capital gain tax as this conversion is not a “transfer” as defined under the IT Act.
Also, it will not attract capital gain tax subject to the following conditions:
The following are some of the implications due to the conversion of a company into a LLP:
Company has to intimate all the authorities concerned about the conversion and make necessary changes in all the registrations and licenses.
As per the above discussions, LLP is a more convenient form of organization over a company from compliance and taxation point of view. So, it may be more suitable for small entrepreneurs and professionals particularly. The conversion from an existing company can be made to an LLP while retaining the advantages of Limited Liability and fewer compliances.
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