Selection of the correct form of business entity is the most important decision taken by an entrepreneur. To make choices simpler and assist you in taking a well informed decision, here is a basic comparison chart of Private Limited Company vs LLP vs OPC – the three most common yet credible forms of business in today’s time.
Private Limited Company – The most successful business type.
In a private company, the business owners hold all shares of the company privately. Shareholders may operate the business themselves, or hire directors to manage the company on their behalf. Registering a private limited company results in protection of personal assets, access to more resources, financial assistance and greater credibility.
Limited Liability Partnership (LLP) – A corporate form of Partnership
It exhibits elements of both partnership and corporation. In LLP, one partner is not responsible or liable for another partner’s misconduct or negligence unlike a traditional partnership in which each partner has joint and several liability. All these three forms of business have the feature if Limited Liability and Separate Legal Entity, ie, the members or partners have no personal liability. Yet, they are different from each other in various aspects.
One Person Company (OPC) – A corporate form of Proprietorship.
One Person Company (OPC) has been recently introduced in India to promote business enterprises that are owned and managed by a single Entrepreneur. OPC allows for a single individual to own and manage the business. One Person Company is therefore a viable option for those looking to start an unregistered Proprietorship. The Comparison chart will give you a clear distinction between all the three forms of business.
| Factors of Comparison | Private Limited Company | One Person Company (OPC) | Limited Liability Partnership (LLP) |
|---|---|---|---|
| Minimum Requirement | Members – 2 Directors – 2 | Member – 1 Director – 1 Nominee of Sole Member – 1 | Designated Partners – 2 |
| Minimum Capital | No minimum requirement | No minimum requirement | No minimum requirement |
| Regulator | Registrar of Companies | Registrar of Companies | Registrar of Companies |
| Compliance Requirements | Annual Return Filing Board Meetings & General Meetings | Annual Return Filing No Board Meetings, if only one director No General Meetings | Annual Return Filing |
| Taxation | Taxed at 30% | Taxed at 30% | Taxed at 30% |
| Credibility | High | Medium | Medium |
| Investor Preference | High | Low | Medium |
| Statutory Audit | Compulsory | Compulsory | If Contribution > Rs 25lacs or, Turnover > Rs. 40lacs |
| Conversion | Can be converted into LLP | Cannot be converted before 2 years | Cannot be converted into a Company |
| Time Taken for Registration | 15 – 20 Days | 15 – 20 Days | 10 – 15 Days |
| Procedure | Obtain DSC (Digital Signature Certificate) Obtain DIN (Directors Identification Number) Name Approval Filing for Incorporation | Obtain DSC (Digital Signature Certificate) Obtain DIN (Directors Identification Number) Name Approval Filing for Incorporation File Nominee details | Obtain DSC (Digital Signature Certificate) Obtain DPIN (Designated Partner Identification Number) Name Approval Filing for Incorporation File LLP Agreement |
Conclusion:
- Private Limited Company is the most popular type of corporate entity in India. Therefore its post incorporation compliance’s are easier. Click here for Private Limited Company Registration.
- Non – convertibility of Limited Liability Partnerships into a Company makes it a less interesting option.
- One Person Company has been recently introduced in India. Therefore, there may be difficulties in obtaining certain licenses or registration after incorporation of a One Person Company.
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