Llp or pvt ltd co.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 October 2014 Hi, I am presently,a 50% shareholder in a pvt ltd co. I plan to sell my 50% shareholding and begin my own business.

I would be in the business of imports and exports, and would also be earning direct income in form of commissions.

My trading turnover projection would be near Rs.40 crores in the next 2-3 years.

I would like to avail of buyers credit and overdraft facilities from the bank, and would be giving my personal assets like office and warehouse to the bank as collateral.

Please advise, what would be more beneficial
viewing requirement of bank credit and smooth operations .Should i establish as LLP or a Company ?

Which would be more tax friendly .

I plan to have myself and my spouse as 50/50 contributor in either the company or the LLP.

Kindly guide the best way forward.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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27 October 2014 Following reasons can help you decide, why you should go for an LLP

LLP are taxed at a lower rate as compared to Company. Moreover, LLP are also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.

Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.

LLP Act 2008 gives LLP the at most freedom to manage its own affairs. Partner can decide the way they want to run and manage the LLP, in form of LLP Agreement. The LLP Act does not regulated the LLP to large extent rather than allows partners the liberty to manage it as per their will and fancies.