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2A simple, fast and inexpensive compliance management tool designed for small and medium business
There are mainly four types of business entities that a person in India can form:1. Company (Private, Public or One person
Company).2. L.L.P.3. Partnership Firm.4. Sole Proprietor.
Government initiatives for boosting business:1. Ease of doing business2. Start Up India3. Make in India4. Digital India
Start a Business
3A simple, fast and inexpensive compliance management tool designed for small and medium business
Private Limited Company
Registered Partnership Firm
Limited Liability Partnership
Who can avail the benefits of the start up India Scheme?
Up to five years from the date of its incorporation--And--
Turnover for any of the financial years has not exceeded Rupees 25 Crore,
--And--
Working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
Qualifiers:
Start Up India Scheme
4A simple, fast and inexpensive compliance management tool designed for small and medium business
Company
b. Private Limited Company: Entity that limits owner liability to their
shares, limits the number of shareholders to 200, and
restricts shareholders from publicly trading shares.
a. Public Limited Company:Company which has offered shares to the general public and has limited liability.
c. One Person Company: Company which has only one member.d. Small Company Other than a Public Co.Companies incorporated under the Companies Act
are regulated by the Ministry of Corporate Affairs and have a structured framework to operate.
Most commonly incorporated business structure is Private Limited Companies. LLP is a comparatively new concept, but an emerging one
Company means a company incorporated under the Companies Act, 2013 or Companies Act 1956.
5A simple, fast and inexpensive compliance management tool designed for small and medium business
a) Independent Legal Existence.
b) Limited Liability of the stakeholders.
c) Perpetual Succession
d) Owned by shareholders and managed by directors
e) Restriction on Transferability of Shares
f) Capacity to sue and be sued in its own name.
Pvt. Ltd. Company
6A simple, fast and inexpensive compliance management tool designed for small and medium business
Limited Liability Partnership
A Limited Liability Partnership is a body corporate incorporated under the Limited Liability Partnership Act, 2008.
LLP is a cusp between a Private limited Company and a Partnership firm. It gives the flexibility of a partnership firm with status of a Private Limited Company.
The Characteristics of a LLPs: a) Independent Legal Existenceb) Limited liabilityc) Perpetual Successiond) LLP Property separate from Partnerse) LLP agreement is the charterf) No Requirements of Minimum contribution
7A simple, fast and inexpensive compliance management tool designed for small and medium business
Similarity between Pvt. Ltd. Companies and LLPs.
Minimum Number of members is Two (2).
Perpetual Succession.
Legal Entity Separate from that of its partners/members
Similar incorporation requirements.
Similar Tax Liabilities
A charter Document in form of MOA and AOA or LLP agreement defines the scope of operation.
Liquidation procedure is same.
8A simple, fast and inexpensive compliance management tool designed for small and medium business
Pvt. Ltd . Companies
•Governed by the Companies Act, 2013 and Companies Act, 1956
•More recognized form of business
•Clear distinction between owners of the shares and management
•Audit is compulsory irrespective of share capital and turnover
•More robust compliance stipulations
Limited Liability Partnerships.
•Governed by the Limited Liability Partnership Act 2008
•Not as recognized as a Private Limited Company
•No clear distinction between the owners and the management. The Management would be based on the agreement.•Audit is only required if the turnover is above 40 lacs and Contribution is above 25 lacs (Rule 24 (8) )
•Compliances are less and a lot more flexible.
Difference between Pvt. Ltd. Companies and LLPs
9A simple, fast and inexpensive compliance management tool designed for small and medium business
Pvt. Ltd . Companies • Preparation of Board Report along with
the Directors Responsibility Statement (Section 134(5)(f).
• Conduct Minimum 4 Board meetings in a calendar year and Hold an Annual General Meeting every year.
• Constitution of a Corporate Social Responsibility Committee.
• File the copy of every resolution and agreement with the Registrar.
• Maintain book of accounts and Register of members.
• Prepare and file financial statement with the Registrar .
• File Annual Return.
• File returns of particulars of Directors and Key Managerial Personnel .
Limited Liability Partnerships
• Maintain Book of Accounts.
• Prepare a Statement of Account and Solvency for the said financial year and file it with the Registrar.
• File an annual return duly authenticated with the Registrar.
Burden of Compliances
10A simple, fast and inexpensive compliance management tool designed for small and medium business
Fees and CostsThe Fees and cost involved in a Pvt. Ltd . Company is more than that of the LLP.
An example of the difference of fees and cost is displayed in the table below :Procedure Companies LLPs
Incorporation (nominal Share capital/contribution does not exceed 1 Lacs.
Rs 5000/- Rs. 500/-
Minimum fees for filing forms statements, returns etc.
Rs. 300 Rs. 50
Application for Identification Numbers Rs 500 Rs 100
Dividend distribution tax 15% Not Applicable
11A simple, fast and inexpensive compliance management tool designed for small and medium business
Advantages of Forming a L.L.P.
Ease of running a business:
No Minimum Contribution amount.
Low incorporation Cost- Low Government Fees.
Minimum number of 2 partners but without any maximum
number. The management of LLP would depend on the LLP agreement
LLPs has a low burden of compliance. LLPs primarily have to file only an Annual Return & a Statement of Accounts & Solvency,
Yearly audits are not compulsory LLPs unless the turnover exceed 40 lacs , or
contribution exceeds 25 lacs.
12A simple, fast and inexpensive compliance management tool designed for small and medium business
Advantages of forming a Company
Most commonly incorporated
business form. Controlled by a set legal framework.
Considering the robust nature of Compliances of a Company, funding in form of Venture Capital, incline towards the Pvt. Ltd. Companies.
LLPs do not have defined provisions for acquisitions and mergers. Investors often look to the acquisition or merger of a company to maximize the return and for a profitable exit. Vital information of Companies are
shared on Public Forums, which instills greater amount of accountability.
13A simple, fast and inexpensive compliance management tool designed for small and medium business
Process
Ease of Incorporation
Cost of IncorporationComplianceManagement of affairsAudits FlexibilityStart Up Benefits
Tax LiabilitiesVenture Capital Funding
Liquidation ProceduresConversion of entityMergers and Acquisitions
Pvt. Ltd . Companies Limited Liability Partnerships.
Feasibility Comparison Checklist
14A simple, fast and inexpensive compliance management tool designed for small and medium business
Key Information
F.D.I : Both Companies and LLPs are now eligible to get 100% FDI through automatic route. (for example: e-commerce marketplace model- 100%)
LLPs can now be converted into a Company as per the Companies Act 2013.The Companies
(Amendment) Act, 2015 has been passed to remove requirements of minimum paid-up capital and common seal for companies. Now no minimum paid up start-up Capital defined for Pvt. Ltd. Companies.
15A simple, fast and inexpensive compliance management tool designed for small and medium business
ConclusionCompanies are structured
and regulated by The Companies Act. Companies are the most incorporated business entity in India.
A LLP enjoys the privileges of a partnership firm with the status of a Company
Thus if you’re looking to form a business that’s unlikely to require external equity funding, you may want to register an LLP, as it combines several benefits of the private limited company and general partnership
However if expansion and external funding are in the books Pvt. Limited
Companies provide a wider option.
16A simple, fast and inexpensive compliance management tool designed for small and medium business
Speaker
Indranil Choudhury Founder & Chief Executive Officer
Lexplosion Solutions Private Limited
17
Contact Us
Lexplosion is also a Member Firm of Leading Indian Industry Associations
HeadquarterLexplosion Solutions Private LimitedInfinity Benchmark, Floor 6, Office# 1, Plot# G1, Block - EP & GP, Sector V, Salt Lake, Kolkata- 700 091, IndiaT. +91.33.40 61 80 83/84/85, F. +91.33.40 61 80 86
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Bangalore OfficeLexplosion Solutions Private LimitedRegus, CBD Bangalore, Level 9 Raheja Towers, 26-27 Mahatma Gandhi Road, Bangalore - 560 001, India
18A simple, fast and inexpensive compliance management tool designed for small and medium business
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