Private Company:

Private company are those companies where the all shares of the company are held privately. They
can operate their business themselves or hire directors to manage the company on their behalf. It is
a business entity which is privately held by some shareholders. It limits the owner liability to the
extent of their shareholding and limits the no. of shareholders to 50 only. It also restricts
shareholders to trade shares publically.

Advantages:
 The liability of the shareholders is limited to the extent of their shareholding their personal assets
are not taken to repay the debts of the company. Although this has one exception where there is
fraud committed in relation to the company it will negate the owner’s liability protection.
 There is restricted trade of shares, It is an advantage to the shareholders who do not want to sell the
shares to the outsiders. So the risk of hostile takeover is low.
 It has perpetual succession and has an independent identity which is different from its owners or
shareholders. It means that the company will still and continue to exist even if the members die or
ceases to be a member. The change in shareholders will not bring any effect on the identity of the
company. It will be the same with same privileges, immunities, estates and possessions. It will
continue to exist till wound up is there according to the Companies Act 2013 or any relevant act.
 It is a Separate legal entity. It has its own assets and liability is a legal entity which can be sued or
sue or can hold and dispose of property of the company. It is capable of owing the funds and other
properties. It is a legal person under whose name the company’s property is vested and is not of the
shareholders.
 There are few shareholders the decisions taken are quick and prompt. They are governed by the
Companies Act 2013 and have to follow the procedures and disclosure norms under the act.
 Income tax act 1961 provides a lower tax burden and rates for the companies compared to other
type of business.
 A company being a legal entity has the power to sue in its name and can be sued by others.

LLP
LLP Registration is limited liability partnership. It is new form of business where both partnership
and corporation exists. Here the partnership is with limited liability. It is registered under LLP Act,
2008 and with Ministry of corporate affairs.
Advantages of LLP:
 LLP can be formed by any amount of capital. There is no need for minimum capital for LLB. It is so set
up hassle free and not burdensome on the owners.
 It requires a minimum of 2 partners and there is no limit on the maximum number of partners of the
LLP.
 The cost of registering LLP is low as compared to a company.
 All limited companies have to get their accounts audited but in case of LLP hther is no such
requirement. Although it is required to audit when the contributions of LLP exceeds Rs. 25 lakh or
annual turnover exceeds Rs. 40 lakh.
 The LLP has to file only two i.e. annual return and statement of accounts and solvency.
 LLP is treated in par with the partnership firm. The provision of dividend distribution tax is not
payable on LLP. Also under Section 40(b) deductions are allowed on the interest given to partners,
any payment of salary bonus commission or remuneration.

Problems with LLP:

 LLP can be bind by the act of one partner without the other partner i.e. one partner can make all
other liable or bind them.
 They cannot raise money from public.
Difference between the LLP and Private Limited Co.
S. No. Factors of comparison Private limited company Limited liability partnership

1. Maximum number of 200 None

members

2. Requirements for Annual return filling borad Annual return filling and
compliance meetings and general Statement of Account &
meetings Solvency.

3. Audit compulsory Only if contribution more

than Rs. 25 lakhs or turnover
exceeds Rs. 40 Lakhs

4. Cost of Formation (Capital Approx: Rs. 10,000 – Rs. Approx: Rs. 9,000 – Rs.
of Rs. 1,00,000/-) 15,000/- 12,000/-

5. Conversion Can be converted to LLP Can be converted into a

company

6. Procedure Obtain DSC (Digital Obtain DSC (Digital

Signature Certificate)
Obtain DIN (Directors
Identification Number)
Name Approval Filing for
Incorporation
Signature Certificate) Obtain
DPIN (Designated Partner
Identification Number)
Name Approval Filing for
Incorporation File LLP
Agreement

7. Time for registration 15-20 days 10-15 days

8. Dividend distribution tax Apply Not apply

So the choice of the business organization depends upon the owners need like if one is considering
raising funds in India you should register as a company and not LLP. Private companies are
considered more credible by the investors then the LLP.