LLP Verse Private Limited Company for Startups
Today we explain you about LLP (Limited Liability Partnership) Verse Private Limited Company for Startups. Startup always confuse about to choose the business entity like which one is better so we present a super answer which is written by Legal Adda on Quora.
“Basically Limited Liability Partnership is best for the startups when they have no budget more than 10000 Rupees and no plan for the funding from angel investor or VC Firms then you can register the LLP instead of Private Limited company to save the auditor expenses or other statutory compliance.
as a Startup point of view instead of Legal Points following are the advantages in the case of LLP verse Private limited company :
- I Have 2 Partners but we have enough money but we need just business registration. we never go for the equity funding or anything else. we need just business registration then LLP is the best instead of Simple Partnership Firm because we can enjoy the Limited Liability Features which is not possible in partnership firm.
- We are just starting the business but we have budget just for the registration but what about the maintenance charge of the companies. what about the Auditor fee or CA’s fee or compliance fee.
so we choose LLP because Auditor is require after the crossing certain turnover limits i.e 50 Lac Rupees.
we save our cost of the appointment of the Auditor in the starting even if we are not doing the business. it is necessary to appoint a Auditor of the Company in case of private limited.
- We are little Startup we can not afford the penalties due to Non Compliance which is very higher in the case of private limited so best thing is go for the LLP.
- Recently govt removed the minimum capital requirements in the private limited company but before 2015 we need to deposit the capital in company current bank account i,e is min 1 lac rupees which is very expensive thing for startup.
- Compliance are easy. we have to just file Annual filings, Income tax return and our personal income tax return. Hardly Annual Compliance is nearby 5000 Rupees annually if we are maintain the accounting yourself.
- We need funding but we never prefer the equity funding , Angel or VC Firms. we can manage through banks loans or Overdraft or CC Limits. yes LLP is good thing we never give control to another person just for a funding.
- We can Protect our brand name like once our llp is registered on our brand name then no one other person can register the same name.
- Best for the Professional Services Providers like CA’s or Lawyers, Consultancy Services.
- LLP Exist out of India also . when i tell about the LLP to outside India then they are thinking about the LLC 😀
- Less Costing, Less Compliance. even in Some State like Punjab, Kerala and MP Stamp Duty are very higher so there is company registration nearby 20000/- Rupees but LLP costing is just only in nearby 8000/- Rupees to 9000/- Rupees.
Note : above points are not legal points. i just explaining on the experience for the startups.
Now i talk about the Private Limited Company when its best for the startups :-
- When i have angel investor or VC Firms which are ready to invest then simply incorporate a private limited company
- When i can bear all the expenses or maintenance charges even if i am not doing any business with that Company.
- When i wanna hire the employees but i have no enough salary or package to offer them then i have ESOP Option.
- When i need legal status of a company for my startup.
- When i want to open a subsidiary company outside to India.
- When we wanna make our startup a global company.
- When i wanna run a Multiple Business Segment on different brand names and companies.
- When i wanna sell my business in future or takeover any other company
so conclusion is both are best as business entity. even Sole Proprietorship Firm and Partnership Firm is also best in some cases for testing our ideas.
Credit : Quora