Online startup registration

This query is : Resolved

Devendra Singh (Querist)
Follow

10 July 2015 We are working on an online marketplace for intagible services. We are planning to register the company. Over the time equity stakes have to be distributed over newly joined partners with expansion of company. Which one LLP or Limited company is better. Also wish to know the pros and cons regarding equity stake changes over passage of time

CA Sreenivasa Rao Munaga

CA Sreenivasa Rao Munaga (Expert)
Follow

11 July 2015 Both have equal pros and cons.
SR. NO. PARTICULAR COMPANY LIMITED LIABILITY PARTNERSHIP
1.
Governing Law

Companies Act, 1956 and various Rules made thereunder

The Limited Liability Partnership Act, 2008 and various Rules made thereunder

2

Registration

Compulsory

Compulsory

3

Creation

Created by law

Created by law

4

Separate Legal Entity

It is separate legal entity, separate from its member, directors.

It is separate legal entity, separate from its partners\ designated partners.

5

Perpetual succession

It has perpetual succession.

It has perpetual succession.

6
Purchase of Property

A company can purchase movable / immovable property in its name.

LLP can also purchase movable / immovable property in its name

7

Common Seal

It denotes the signature of the Company and every company shall have its own common seal.

It denotes the signature of the Company and LLP may have its own common seal, if it decides to have one.

8

Formalities of Incorporation

Various documents / declarations executed in prescribed formats pre-filled in designated e-forms are required to be filed with ROC along with filing fee.

Various documents / declarations executed in prescribed formats pre-filled in designated e-forms are required to be filed with ROC along with filing fee.

9

Time line

It will take approx. 15 days to incorporate ( inclusive of time taken to obtain DIN)

It will take approx. 20 days to incorporate ( inclusive of time taken to obtain DPIN)

10

Expenses for formation

Minimum Statutory Fee for incorporation of Private Company is Rs. 6000/- and Minimum Statutory fee for Public Limited company is Rs. 19000/-

Minimum Statutory fee for incorporation of LLP is Rs. 1500/- and Maximum fee for incorporation of LLP is Rs. 7000/- (approx.)

11 Legal Proceeding A company can sue and be sued LLP can also sue and be sued
12
Taxation

It is a separate taxable entity

Its status in unclear, pending changes in income tax act.

13

Name

Suffix ‘Limited’ or ‘Private Limited’ has to be added to the name

Suffix ‘LLP’ or Limited Liability Partnership has to be added to the name.

14

Change of name

The name of the company can be changed with the prior approval of Central Government.

The name of the LLP can be changed with the prior approval of Central Government.

15

Ownership of Assets

The company has ownership of assets and members only have shares in the company

The LLP has ownership of assets and Partners only have capital contribution in the LLP

16

Liability

Liability of members is only limited to the shares held by them.

Liability of partners is limited upto their capital contribution however in case a partners acts with an intension to conduct fraud, they are personally liable.

17 Agency Relationship The Directors act as an agents of the company Partners are agents of LLP
18 Contracts / Business transaction by Member/ Directors/ Partners A director \ member can enter into contract with the company A partner can enter into contract with the LLP
19 Power of Member\ Partner\ Director Directors have power to conduct day to day affairs of the company, Member practically have no say in the management. The power of partners/ designated partners to conduct the day to day affairs is specified by LLP agreement / LLP act.
20 Dissolution by an act of partners / members / directors Continuance of company is not affected by the acts of its directors\ members Continuance of LLP is not affected by the acts of its Partners.
21 Transferability of interest Shares of every company except private company are freely transferable. Rights/ interest of partners are transferable as per the provisions of LLP agreement.
22 Share Certificate Right/ Interest of the members in the company is denoted by share certificate There are no provisions for issuing of Share Certificate. Rights/ Interest of the Partners in the LLP are evidenced by Partnership agreement.
23 Jurisdiction of Company Law Board (CLB) CLB has jurisdiction over the affairs of the company. CLB has jurisdiction over the affairs of the LLP
24 Nature A company is a body corporate formed and incorporated under the Companies Act, 1956 and which has legal entity separate from its members, having perpetual succession and liability of its members shall be limited. A LLP is a body corporate formed and incorporated under this act and which has legal entity separate from that of its partners, having perpetual succession and liability of its partner shall be limited.
25 Compromise \ arrangements \ merger \ amalgamation Provisions exist for Compromise \ arrangements \ merger \ amalgamation for companies in the act. Provisions exist for Compromise \ arrangements \ merger \ amalgamation for LLP in the act.
26 Minimum Capital requirement Minimum paid up capital of Rupees One lac for incorporation of Private company and Rupees five lacs for incorporation of Public Company to be required. No such requirement
27 Books of Accounts Books of accounts must be prepared as specified in the Companies Act, 1956 Books of accounts must be prepared as specified in the LLP Act.
28 Manner of Keeping Books of Accounts Accrual basis Cash basis or accrual basis
29 Filing of Annual Accounts Balance Sheet and Profit and loss account are required to be filed with the ROC annually in the prescribed format Statement of accounts and solvency are required to be filed with ROC annually in the prescribed format.
30 Audit of Accounts As per the provisions of companies Act, 1956 accounts have to be audited annually As per the provisions of LLP act, accounts to be audited annually except for LLP’s having turnover less than Rs. 40 lacs or Rs. 25 lacs contribution in any financial year.
31 Applicability of Accounting standards Accounting standard are Applicable Its status in unclear, pending changes in income tax act.
32 Mode of Service documents Documents to be served on company / directors may be served through electronic means Documents to be served on LLP / designated partners may be served through electronic means
33 Annual Return Annual Return is required to be filed with the ROC annually in the prescribed format Annual Return is required to be filed with the ROC annually in the prescribed format
34 Director Identification Number / Designated Partner Identification Number Each Director required to have a Director Identification Number before being appointed as a Director of any company Each Designated partner required to have a DPIN before being appointed as a Designated Partner of LLP.
35 Digital Signature Atleast one director of the company should have their Digital signature. Digital signature is a pre-requisite for e-filing. Atleast one designated partner of the LLP should have their Digital signature. Digital signature is a pre-requisite for e-filing.
36 Minimum Number of Member Minimum two for private Company and minimum seven for public company as per the Companies Act, 1956 Minimum two partners
37 Maximum number of Member Maximum 50 in case of Private Company and no cap of maximum number of Member in Public Company as per the Companies Act, 1956 No cap of maximum number of its partners
38 Designated partner/ Director/ Managing Partner Minimum two directors in case of Private company and minimum three in case of Public company. Minimum two designated partner
39 Need for Designated partner/ Director/ Managing Partner to be partner/ member Directors need not be a members of the company The designated partner need not be a partner of the company
40 Vacancy In case the company has only minimum number of director then casual vacancy in the office of director must be filled in 30 days In case the LLP has only minimum number of designated partner then casual vacancy in the office of designated partner must be filled in 30 days
41 Remuneration / Salary Remuneration can be given to the Executive / non-executive directors as per the provisions of Companies Act, 1956. Remuneration will be provided
only if provided in the LLP agreement.

42 Memorandum and Articles of Association \ Partnership deed/ Partnership Agreement Memorandum and Articles of Association is a charter of the Company which defines its scope of operation. LLP Agreement is a charter of the LLP which denotes its scope of operation.
43 Meetings Meeting of Board of Directors / Shareholders have to be held at specific time period as per the provisions of Companies Act, 1956. Meeting of the Designated Partners have to be held at specific time period as per the Provisions of LLP Act.
44 Compounding of offences Offences punishable with fine are compoundable Offences punishable with fine are compoundable
45 Change in directors / designated partners/ Partners Notice of change of director is to be given to the ROC. Notice of change of director is to be given to the ROC.
46 Publication of name Official correspondence / publication/ letter head/ invoices must mention the full name of the company and address of the registered office. Official correspondence / publication/ letter head/ invoices must mention the full name of the company and address of the registered office and a statement that it is registered with limited liability.
47 Rights / Duties / obligation of Partners / Managing Partners / Directors Rights / Duties / obligation of directors are governed by AOA and resolution passed by shareholders or directors. Rights / Duties / obligation of directors are governed by Partnership Agreement
48 Minutes Decisions taken in the meeting of board of directors/ shareholders must be recorded as minutes. Decisions taken in meetings must be recorded as minutes with in 30 days
49 Oppression and Mismanagement by majority shareholders Elaborate provision relating to redressal in case of oppression and mismanagement

No provision relating to redressal in case of oppression and mismanagement
50 Voting Rights Voting rights are in proportion to the shares held by members. Each partner has only one vote
51 Transfer of Share / Partnership rights in case of death In case of death of member, shares are transmitted to the legal heirs. In case of death of partner, the legal heir has the right to refund of capital contribution + share in accumulated profits, if any. Legal Heirs will not become partners
52 Cessation as partners / member A member/shareholder can cease to be a member by selling his shares. A partner can cease to be a member by transferring his share but the transfer of right or cessation of partner does not by itself cause the disassociation of the partner notwithstanding his retirement, and he like the other continuing partners of the firm remain liable as partner to third parties for any act done by any of them which would have been an act of the firm if done before retirement until public notice is given of the retirement either by the retired partner or any other partners of the reconstituted firm.
53 Admission as partner/ member A person can become a member by buying shares of a company A person can be admitted as a partner with the consent of all the partners.
54 Drawing Drawings are not permitted Drawings are permitted as per the LLP agreement