LLP vs. Company

 

LLP vs. Company: An LLP (Limited Liability Partnership) and a company represent distinct legal business structures, showcasing prominent dissimilarities. Here are some of the main differences between an LLP vs. Company:

Legal Structure:

An LLP is a partnership where the partners have limited liability, meaning their personal assets generally do not come in the liabilities of the LLP. A company, on the other hand, is a separate legal entity from its owners (shareholders), providing them limited liability as well. 

 Formation:

An LLP incorporate with registering with the appropriate regulatory authority, typically the Registrar of Companies or similar authority and submitting the necessary incorporation documents. A company can come in existance by incorporating and registering with the same regulatory authority.  It requires a Memorandum of Association and Articles of Association. 

 Management and Ownership:

An LLP is managed by its partners, who are also the owners of the business. They participate in the day-to-day operations and decision-making. In a company, the shareholders appoint directors to manage the company’s operations and make strategic decisions. The shareholders may or may not involve in the company’s day-to-day activities.

 Legal Status and Perpetuity:

An LLP has perpetual succession, meaning it continues to exist even if the partners change or retire. The death, retirement, or insolvency of a partner does not necessarily lead to the dissolution of the LLP. In contrast, a company has a separate legal status and can exist perpetually, regardless of changes in its shareholders or directors.

Regulatory Compliance:

LLPs generally have fewer regulatory compliance requirements compared to companies. For example, LLPs may have more flexible accounting and audit requirements, fewer reporting obligations as well as fewer regulatory filings. Companies are typically subject to more stringent compliance requirements, including regular financial audits, annual filings, and board meetings.

Taxation:

LLPs typically tax as pass-through entities.  Where the profits and losses are pass through to the individual partners who report them on their personal tax returns. Companies are separate taxable entities.  they are subject to corporate income tax on their profits. Shareholders of companies need to tax on any dividends received from the company.

For more information visit this site: https://www.mca.gov.in

 

 

FAQs

• What is a Company?

  • A company is an independent legal entity established for the purpose of conducting business. It can be a private Ltd company (Pvt Ltd) or a public limited company (Ltd), where shareholders own shares and have limited liability.

• “What are the liabilities of partners in a Limited Liability Partnership (LLP)?

  • In an LLP, partners have limited liability, meaning they are not personally responsible for the debts of the LLP beyond their investment.

• What is the liability of shareholders in a Company?

  • In a Company, shareholders have limited liability, which protects their personal assets from the company’s debts.

• How are profits distributed in an LLP?

  • Profits in an LLP are distribute according to the partnership agreement. Partners can decide how to share profits, and it doesn’t have to be in proportion to their investment.

• How are profits distributed in a Company?

  • In a Company, profits are distribute as dividends to shareholders base on the number of shares they own, subject to board approval.

• What is the management structure of an LLP?

  • An LLP is manage by its partners, who have the authority to make decisions and run the business.

• What is the management structure of a Company?

  • A Company is manage by a board of directors elected by the shareholders. The directors are responsible for strategic decisions and management.

• What are the regulatory requirements for LLPs?

  • LLPs have fewer compliance requirements compared to companies, such as simpler accounting and fewer annual filings.

• What are the regulatory requirements for Companies?

  • Companies have more stringent compliance requirements, including detailed annual reports, audits, and disclosures to regulatory authorities.

 

These are general differences and the specific regulations. Its requirements may vary by jurisdiction. It’s important to consult with legal and financial professionals to understand both specific implications and advantages of each business structure in the relevant jurisdiction.

 

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