This article shows a comparison of Limited Liability Company vs. Limited Liability Partnership.
Limited Liability Company:
It refers to those companies, which have a separate legal identity from its members. It implies that the Limited liability Company has also obtained authorities similar to a corporation, such as Tax identification number (TIN), Opening a bank account, conducting business in the name of company and more.
One of the advantages of LLP is that, the members of company have a limited liability, which means that the company has a separate legal identity and members will not be required for paying company debts. In case, LLP does not cover their liability from their assets, then creditors cannot move to company members for their recovery. It means that members are not personally liable for paying company liabilities or debts to his creditors.
LLP has various combining features of partnership and corporation. Another advantage of LLP is Tax advantage. This implies that the company does not need to pay double taxation by company. Double taxation means that the company members do not need to pay corporate tax and individual tax. This is another advantage of Limited Liability Company but the circumstances stand in favor of corporate tax.
Limited Liability Partnership:
LLP was introduced in India since 2008 under the act of Limited Liability Partnership with effect from April 1, 2009. We can’t consider LLP like a partnership firm because LLP has a separate legal entity. LLP can own assets and can be sued too. In LLP, partner is not be liable or responsible for misconduct and negligence of another partner.
The minimum number of partners is 2 and maximum number of partners is unlimited. In general, LLP should be organised for only gaining profit. LLP has various advantages, such as it does not require to maintain minimum capital contributions, is easy to manage, has lesser compliance requirements, lower cost included in formation and others.
Well, after discussing about the meaning of Limited Liability Partnership and Limited Liability Company, let’s explain the difference among both terms. Now, we define the following differences between both of them:
1. Numbers of Members:
In Limited Liability Partnership, the minimum number of partners required is 2 and the Maximum number of partner is unlimited. On the other hand, Limited Liability Company has a requirement of the minimum number of shareholders being 7 and maximum number of shareholders is 50.
2. First step for Incorporation:
In Limited Liability Partnership, first of all, partners are required for applying a Designated Partner Identification Number (DPIN) (apply by both partners) and obtain a Digital Signature for one of the partners. On the other hand, Members of LLC are first required for applying selected number of company names and after that, can apply for Director Identification Number (DIN) and a Digital Signature for company directors.
3. Minimum Paid up Capital:
Limited Liability Company has incorporated with a minimum paid up capital of Rs. 100000 and, in case of Limited Liability Partnership, the paid up capital is not specified.
It is mandatory for Limited Liability Company to organize a quarterly board of Directors meeting and annual shareholder meeting. However, Limited liability Partnership is not required for organising such meetings.
In case of LLP, they require to audit, if their contribution is above 25 lakhs and if their annual turnover is above 40 lakhs. On the other hand, Audit is compulsory in case of LLC, irrespective of share capital and turnover.
Hope you like this article about the comparison of Limited Liability Company Vs. Limited Liability Partnership