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Private Limited Company and LLP is the most popular corporate entity that is registered extensively in India. It is governed by the MCA (Ministry of Corporate Affairs) and regulated by the Companies Act, 2013 and the Companies Incorporation Rules, 2014 and Partnership Act, 1932. Private Limited Company (Pvt Ltd) registration is the most popular legal structure option for Start-ups & Growing businesses in India. Limited Liability Partnership (LLP) registration is Perfect business solution for Small and Medium sized ventures going for collaboration.
The process for company registration begins with obtaining digital signatures. Next, the name approval form is submitted. The Government typically provides name approval within 48 hours. Then, legal documents are prepared which need to be signed by the directors and share holders.
Once the documents are verified, your engagement manager will apply for incorporation with the MCA on the same day. Incorporation approval in about 48 - 72 hours of business days.
Here's a list of tasks that our team of experts accomplish in Company/LLP Incorporation.
- Obtaining Digital Signature Certificate(DSC)
- Obtaining Director Identification Number (DIN)
- Name Approval
- Registration of Company/LLP on MCA Portal
- Certificate of Incorporation
- Obtaining Income Tax PAN & TAN
- GST Registration
Here's a list of documents required for Company/LLP Incorporation
- PAN of all proposed directors
- Identity proof of all proposed directors i.e. Voter Card/DL/Password/Aadhar bank
- Current Address proof i.e. Latest Bank Statement/passbook or latest utility bill i.e. electricity/telephone bill not older than 2 months
- Passport Size Photographs of each director
- Mobile No, Email ID, Place of Birth, Occupation and qualification of each director
- Ownership details of registered office, NOC from owner will be required
- Copy of latest utility bill in the name of owner of Registered Office
PROPRIETORSHIP Vs. PARTNERSHIP Vs. LLP Vs. PRIVATE LIMITED COMPANY
1. Types of Business entities in India
Sole proprietorship Sole Proprietary is one man entity where there is no difference between owner and the entity. All the responsibility is on the owner himself. Likewise, he takes all profit and losses himself and Income Tax return is filed with proprietor PAN. Partnership Partnership is owned by two or more people where the ownership and share in profit and losses are split between the owners in a certain agreed ratio and it’s established through the partnership deed. Limited Liability Partnership LLP is like a blend of sole proprietorship and partnership. Here few or all partners have limited liability in the organization and established through registration with MCA site http://www.mca.gov.in/. Private Limited Company It is a business entity formed under Companies Act, 2013 with a minimum of 2 members. Shareholders are the owners of Private Limited Company and it’s established through registration with MCA site http://www.mca.gov.in/.
2. Name of Proprietorship, Partnership, LLP & Pvt Ltd Co.
Sole proprietorship and Partnership entities can choose any name of their choice. For Example: Ram & Associates, Laxman & Co. In case of Limited Liability Partnership, its name should end with LLP. For Example: Ram & Associates LLP Private Limited Company's name should end with Pvt Ltd For Example: Ram & Associates Private Limited However, before choosing any name for your organisation you would have to ensure that no company has already registered with that name through this link http://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do and then you would have to check whether there is any trademark registered with that name through this link https://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx If neither a company has registered or nor trademark has registered with your desired name then you may go with that name provided that is allowed under the Trademark Act, 1999 and not violating the other Indian act also.
3. Governing Act of Proprietorship, Partnership, LLP & Pvt Ltd Co. - Sole proprietary is not bounded legally by any law. It means that anyone who wants to start a sole proprietary can do it without any legal charges
- Partnership is governed by Indian Partnership Act,1932. Every partnership should comply with the laws of Indian Partnership Act, 1932.
- The act which governs Limited Liability Partnership is LLP Act, 2008.
- Private Limited Company is governed by Companies Act, 2013.
Before commencing a business one should know the rules of its respective law and proceed accordingly as the law states.
4. Registration of Proprietorship, Partnership, LLP & Pvt Ltd Co. Sole proprietorship is not regulated by any act. So, there is no registration required. For example- To open a new grocery store, there is no registration required. However one may proceed with the compulsory GST registration when the sales cross the threshold limit of turnover. The limit for the sales/ turnover is more than 40 lakhs in one financial year or in case of services if the turnover is more than 20 lakhs For a Partnership entity, a partnership deed is to be created for registering it legally. Also registration with the registrar of firms can be done by filling an application form signed by all partners. Even if the registration is not done, partnership will be legally valid. Limited Liability Partnership's registration is made by filing with Ministry of Corporate Affairs (MCA)Private Limited Company, the process is almost same as that for LLP.
5. Ownership under Proprietorship, Partnership, LLP & Pvt Ltd Co. Owner of sole proprietorship is the proprietor himself, it’s a one man company Partnership is owned by its partners. There are different kinds of partner’s i.e. active partner or sleeping partner all the partners are owners of the entity LLP’s owners are its designated partners A private limited company's owners are its shareholders. The board of directors runs the company but ownership lies with the shareholders only.
6. Income tax liability for Proprietorship, Partnership, LLP & Pvt Ltd Co. Sole proprietors tax is calculated in the same way as that of an individual's i.e. at slab rate as applicable to an individual In case of partnership and LLP tax rate is 30%. No benefit of slab rate is not given For the private limited company tax rate is 25% flat however if the company will forgo the benefit of various deduction available under the chapter VIA and the Section 10AA then the tax rate would be 15% if any new company will be incorporated and 22% if the company is old.
7. Minimum and Maximum members for Proprietorship, Partnership, LLP & Pvt Ltd Co. - As Sole Proprietorship is an one man entity there will be always a single owner
- Partnership requires 2 members in minimum and up to 100 members maximum
- LLP also requires minimum of 2 members and can have unlimited membership
- In a private limited company, minimum membership is 2 and can go up to 200 members
8. Compliance for Proprietorship, Partnership, LLP & Pvt Ltd Co.
a. GST Compliances (Applicable in case of Proprietorship, Partnership, LLP & Private Limited)
Registration under GST law is compulsory for entities with more than Rs 20 lakhs turnover in services and more than Rs 40 lakhs turnover in goods. After registration, returns are to be filed monthly or quarterly
Filing annual return is also compulsory. However, annual audit is to be done with a Chartered Accountant only when turnover is more than Rs 5 crores b. Income tax compliances (Applicable in case of Proprietorship, Partnership, LLP & Private Limited)
Filing income tax return is compulsory
Tax audit is to be done, if the turnover is more than Rs 50 lakh in case of professional and Rs 5 crore for others c. PF and ESI (Applicable in case of Proprietorship, Partnership, LLP, & Private Limited) Every organization has to make a registration when the total number of employees exceeds 20. And after registration it’s compulsory to file monthly retur d. Other compliances under the respective laws In case of LLP and Private limited company there are other compliances which one needs to fulfill for the LLP Act and Companies Act respectively: In case of Private Limited Company the following are the indicative compliances needs to fulfilled by a company a. Statutory audit under the companies Act from a CA. b. Maintenance of proper books of accounts as per the companies act, 2013 c. Filing of Annual return under Form AOC 4 d. Maintenance of compulsory registers under the Companies Act, 2013 e. Holding of 4 Board of directors meeting in one financial year f. Minimum one lakhs authorised capital In case of LLP the following are the indicative compliances needs to fulfil by a LLP a. Statutory audit under the companies Act from a CA if the turnover is more than 40 lakhs. b. Maintenance of proper books of accounts c. Filing of Annual return
9. Estimated yearly compliance cost of Proprietorship, Partnership, LLP, & Pvt Ltd
In case of sole proprietorship and Partnership, there are no yearly compliance cost as there is no mandatory registration For LLP, there is cost of maintenance of books of accounts, statutory audit and annual return filing which can come up to Rs 25 thousand approximately For private limited company, there are many yearly compliances such as maintenance of books of accounts, return filing, BOD meeting and audit by a chartered accountant which can cost a minimum of Rs 50 thousand approximately
10. Benefit for Proprietorship, Partnership, LLP, & Private Limited a. Benefits of Sole proprietorship and partnership - For small scale businesses, where legal identity and large funds are not necessarily Sole proprietary and partnership can be chosen
- Less rules to abide by as there is no requirement of compulsory registration
- All the management and profit-sharing decision is taken by owners itself
b. Benefits of LLP and Private Limited Compan
- In these forms of business, the entity acquires a legal identity separate from its owners
- As the owners and business is separate, liability of owners is limited to their share amount
- These entities have perpetual succession i.e., the business will continue to exist even if its members come and go
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