What should you choose for your startup – LLP or Pvt Ltd ?

What should you choose for your startup – LLP or Pvt Ltd Company ?. Nowadays the trend of registering a startup and making operational is very high. Youngsters and Teenagers are increasingly participating in the scheme of the Government of India, called “Startup India”, but it is very much crucial for the person to select which kind of institution it should select, should he select Company form or Proprietorship concern or Limited Liability Partnership or any other form. But mostly everyone prefers from LLP or Company as mostly every business is started jointly in the name of the joint starters. So this article would clarify the Pros and Cons of selecting LLP or Company form.

Why to Select LLP form, rather than Company form ?

Selecting the Limited Liability Partnership form has many advantages rather than selecting the company form of enterprise. The pros which the LLP offer has been mentioned in detail below:

  • The first and foremost advantage of forming the LLP is that the registering the LLP is much easier than company form, where the documents to be given and other compliances are also less. So the formation becomes easy.
  • There is no requirement of capital to be brought in by the promoters where as in company form, there is requirement that you need to bring at least Rs. 1 lakh as capital in the company form. As startups are always short of funds, this might help you to save from the financial crisis.
  • There is savings in cost of the compliances regarding to the Audit of the LLPs. As the audit of LLPs is not compulsory but are subject to some conditions which if fulfilled then only audit needs to be done, otherwise they are exempt from the audit. The conditions for the Audit of LLP are a). Contributions > 25 Lakhs or b). Turnover > 40 Lakhs
  • The Tax consequences on the company are much complicated than the other form. There is lot of non-compliances penalties which would be levied in case of default. As there is cash stringent in the startups, it is always suitable to choose the LLP form.
  • There is also no limit on the number of members or partners which can be appointed, while in case of company there is no such restriction. Rather this is only helpful when the number of partners or owners or promoter is more than 200.

Why to Select Company form, rather than LLP form ?

  • The greatest disadvantage of LLP form is that it can not raise the funds from the public at large, which the largest advantage of the company form. So if your startup is in requirement of funds and wants to come up with the issue, then it should not adopt the LLP form.
  • The other disadvantage is that the creditability or the reputation company form is much higher than the LLP for, which suggest the trust in the company form is much higher.
  • The investors are ready to invest in the company form of concern rather than LLP form, as they would not be able to find the roles and responsibilities amongst the promoters in LLP form.

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