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LLP, 2008

IMPORTANT POINTS :
1. It is beneficial for small scale enterprise, professionals
2. It was basically formed to provide opportunities to the IT,A/C,LAW sector
3. It enjoys benefits of both partnership firms and a private limited company
4. LLP is more flexible than a private limited company
5. Interest of minority partners is protected in LLP act
6. LLP is a plethora of penalties because 40% of the LLP act sections covers penalties sections



FEATURES :

1. The minimum number of partners required is 2
2. There is no limit on the maximum number of partners in LLP
3. In LLP the partners would not be liable for the unauthorised act of the other partners
4. It has a separate existence and perpetual succession
5. The liability of the partners would be limited up to an amount as decided by the partners in the
agreement.
6. Registration is compulsory for the LLP
7. Registration is to be done with MCA (Ministry of Corporate Affairs)
8. E-filing is mandatory
9. LLP can be converted in to Limited Company
10. The designated partners are liable for the LLP act compliance requirements.


Distinction Between A Public Company And a Private Company Following are the main points of
difference between a Public Company and a Private Company :-
1. Minimum Paid-up Capital : A company to be Incorporated as a Private Company must have a minimum
paid-up capital of Rs. 1,00,000, whereas a Public Company must have a minimum paid-up capital of Rs.
5,00,000.
2. Minimum number of members : Minimum number of members required to form a private company is 2,
whereas a Public Company requires at least 7 members.
3. Maximum number of members : Maximum number of members in a Private Company is restricted to 50,
there is no restriction of maximum number of members in a Public Company.
4. Transerferability of shares : There is complete restriction on the transferability of the shares of a Private
Company through its Articles of Association , whereas there is no restriction on the transferability of the shares
of a Public company
5 .Issue of Prospectus : A Private Company is prohibited from inviting the public for subscription of its
shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for
subscription i.e., a Public Company can issue a Prospectus.
6. Number of Directors : A Private Company may have 2 directors to manage the affairs of the company,
whereas a Public Company must have at least 3 directors.
7. Consent of the directors : There is no need to give the consent by the directors of a Private Company,
whereas the Directors of a Public Company must have file with the Registrar a consent to act as Director of the
company.
8. Qualification shares : The Directors of a Private Company need not sign an undertaking to acquire the
qualification shares, whereas the Directors of a Public Company are required to sign an undertaking to acquire
the qualification shares of the public Company
9. Commencement of Business : A Private Company can commence its business immediately after its
incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of
business is issued to it.
10. Shares Warrants : A Private Company cannot issue Share Warrants against its fully paid shares, Whereas
a Private Company can issue Share Warrants against its fully paid up shares.
11. Further issue of shares : A Private Company need not offer the further issue of shares to its existing share
holders, whereas a Public Company has to offer the further issue of shares to its existing share holders as
right shares. Further issue of shares can only be offer to the general public with the approval of the existing share
holders in the general meeting of the share holders only.
12. Statutory meeting : A Private Company has no obligation to call the Statutory Meeting of the member,
whereas of Public Company must call its statutory Meeting and file Statutory Report with the Register of
Companies.
13. Quorum : The quorum in the case of a Private Company is TWO members present personally, whereas in
the case of a Public Company FIVE members must be present personally to constitute quorum. However, the
Articles of Association may provide and number of members more than the required under the Act.
14. Managerial remuneration : Total managerial remuneration in the case of a Public Company cannot
exceed 11% of the net profits, and in case of inadequate profits a maximum of Rs. 87,500 can be paid. Whereas
these restrictions do not apply on a Private Company.
15. Special privileges : A Private Company enjoys some special privileges, which are not available to a Public
Company

Difference between Company and Limited Liability
Partnership

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 It has perpetual succession. It has perpetual succession.
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 CLB has jurisdiction over CLB has jurisdiction over the affairs of the LLP
Company Law
Board (CLB)
the affairs of the company.
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 LLPs 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 Maximum 50 in case of No cap of maximum number of its partners
of Member Private Company and no
cap of maximum number of
Member in Public
Company as per the
Companies Act, 1956
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
No provision relating to redressal in case of oppression
and mismanagement
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

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