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LLP or Private Ltd. Which is better?

Gopi (Engineer) (123 Points)

04 January 2023

Two individuals (one of them is an NRI) want to come together and engage in businesses like consultancy, dealership etc.

We are debating the pros and cons of forming LLP vs Private Ltd partnership.

Can you please suggest which one is better considering the following?:

2 partners - one of them is an NRI
Trading or dealership (no goods sold)
Liability should be limited and not exposed to personal assets

Thanks in advance!

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4 Replies

CA Altamush Zafar (GST Consultant) (15971 Points)
Replied 04 January 2023

LLP will be much better since it has way lesser compliances.
For Income Tax point of view private limited is better

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Gopi (Engineer) (123 Points)
Replied 04 January 2023

Thank you.

I heard that Small LLP is a newly introduced type of entity. Would this be a suitable entity for our proposal?

Shrijay Sheth (Co-Founder) (2692 Points)
Replied 30 May 2023

Both LLPs and Private limited companies have their pros and cons.These are the relevant pros and cons for you keeping in mind the given factors:

LLP (Limited Liability Partnership):

Pros:

Fewer compliance requirements than Pvt ltd companies.
Limited liability for partners, protecting personal assets.
Flexibility in terms of management and operations.
Separate legal entity with perpetual succession.

Cons:

Income Tax applicable rate is higher compared to private limited companies.
Limited access to capital markets for raising funds.

Private Limited Company:

Pros:

Limited liability for shareholders, protecting personal assets.
Ability to raise funds through equity or debt financing.
Greater recognition and credibility in business transactions.
Lower income tax rate than LLPs

Cons:

More compliance requirements compared to an LLP.
More formalities and costs associated with incorporation and maintenance.

Overally, considering the factors of limited liability, NRI involvement, and the nature of the businesses, an LLP might be a suitable choice. However, it is important to consult with legal and tax professionals who can provide personalized advice based on the specific circumstances and current legal regulations. You can reach out to us at LegalWiz.in for more detailed advice.

Akash (owner) (65 Points)
Replied 30 May 2023

Initially it is always advisable to start with small steps and then gradually take progressive steps. It is always better to start with LLP as it gives every feature available to a Private Limited Company. However, Private limited company is advisable for taking Government tenders as certain tenders condition contain clause stating requirement of a private limited company.

For any further discussion you can send mail at aakash.aca @ gmail.com