Limited liability partnerships (LLPs) are growing in number since their introduction in 2008, but they should be more popular than they now are. This is because the LLP offers nearly all the benefits of a private limited company, with none of the downsides of a partnership firm.
- Limited liability
- Tax advantages,
- Can accommodate an unlimited number of partners
- Credible registration with the Ministry of Corporate Affairs (MCA)
- Less compliance than a private limited company
- Overall significantly cheaper to start and maintain.
Why Private Limited Companies Are Popular
- The biggest advantage of a private limited company is that it differentiates between shareholders and directors.
- You have to be registered as Pvt Ltd if you are in need of funds or even want to do ESOPs
If you are going to be in an online marketing business or small shop, there is no need for a Pvt Ltd Registration. LLP will just do. Even if you run a business of a considerable size and not looking for funding for a couple of years at least, just go for a LLP
LLP is Cheaper To Start & Run
LLP registrations costs are low and hence are the best bet for a small business. See for yourself the cost difference
|Pvt Ltd Cost||LLP Cost|
|Rs. 15,000: Registration||Rs. 10,000 Compliance|
|Rs. 15,000: Compliance||Rs. 4,000 Compliance|
|Rs. 15,000: Audit & Rertun||Not mandatory – Only reqd if turnover is greater than 40 Lak in a year|
For the price of starting a private limited company you can start and maintain an LLP in its first year.
- No Penalties With LLP
- Many private limited companies don’t or can’t pay to comply with MCA regulations. This can lead to hefty fines of up to Rs. 1 lakh a year. With an LLP, given its low costs, it’s unlikely that you wouldn’t be able to comply. This would ensure that you skip the fines altogether.
So if you’re starting a business that isn’t likely to raise funding or offer ESOPs to employees, an LLP is a good choice. It will keep your start-up costs low and ensure you aren’t running around fulfilling compliances instead of running your business.
Do, however, take time to dwell on this question; because once you decide to register an LLP, you will likely get several licenses and approvals in its name (profession tax or shops and establishments registration, for example). If, at any point, you need to switch from an LLP to a private limited company, considerable effort would be required.