Company LLP Partnership What is a Company vs

Company, LLP & Partnership What is a Company vs. Partnership Limited Liability Partnership Company vs. LLP

Meaning : PARTNERSHIP According to section 4, Partnership Act of 1932 "Partnership is defined as the relation between two or more persons who have agreed to share the profits according to their ratio of business run by all or any one of them acting for all".

Meaning : COMPANY A company is: an association of many persons who contribute money or money’s worth to a common stock and employ it in some common trade or business and who share the profit or loss arising there from.

Company Vs. Partnership

Company Partnership Governing Act Companies Act 2013 Partnership Act 1932 Registration is compulsory Registration is optional Legal Status It has separate Legal Entity No separate Entity Liability Limited liability Unlimited liability Name of the Entity Must have words. . . Pvt Ltd /Ltd. / OPC Any name as per the choice Transfer of Interest Shares are Freely Transferable Cannot transfer without the consent of the partners Agency Directors are the agents to company and not others. Partners are agents of the firm and other partners Powers Can only carry out objectives in the memorandum Can do anything that the partners agree to do.

Company Partnership Creation By law By agreement Perpetual succession Perpetual Succession No perpetual succession Minimum members For Public Company : 7 For Private Company : 2 OPC : 1 Min. Partners : 2 Maximum Members Unlimited : Public company 200 : Private Company Banking Business: 10 Other Business : 20 Maintenance of Books Maintenance and Auditing by qualified auditors annually No such compulsion by law Charter document Mo. A Partnership Agreement

Company Partnership Common Seal It must have a common seal There is no concept of common seal Formalities of Incorporation Mo. A, Various e forms, prescribed fee With Registrar of companies Partnership deed, forms and affidavit, prescribed fee With Registrar of Firms Can it sue third party Being legal entity can sue Only registered firm can sue Can Foreign national enter in Indian business? Yes subject to certain laws No Ownership of assets Independent of the partners has ownership Partners have joint ownership of all the assets Dissolution May take place by voluntarily, NCLT, creditors May take place by mutual agreement, insolvency, court order

Company Partnership Annual filing with the Registrar Annual statement of No return is to be filed accounts, statement of solvency, annual return to be filed every year Digital signature Required as e forms are filled electronically No requirement

Meaning : Limited Liability Partnership LLP Act, 2008 passed by Lok Sabha on 12 th of December 2008 and the President gave assent to the Bill on 7 th January 2009. Limited Liability Partnership means a partnership formed and registered under LLP Act, 2008 Features : 1. Body corporate 2. Separate legal entity 3. Perpetual succession 4. Non-applicability of IPA provisions 5. Hybrid of companies & Partnerships

Company Vs. LLP

Company LLP Prevailing Law Governed by The Companies act, 2013 Governed by LLP act, 2008 Motive Can be formed for profit or service motive Can be formed only for profit motive Charter document Mo. A defines scope of operations LLP agreement denotes the scope of operations Common seal Must have its own official May have its own signature common seal Formalities of Incorporation Mo. A, Various e forms, prescribed fee to be filed with the Registrar of companies LLP agreement, Various e forms, prescribed fee to be filed with the Registrar of LLP

Company LLP Minimum members For Public Company : 7 For Private Company : 2 For OPC : 1 Min. Partners : 2 Maximum Members Public company = unlimited Private Company= 200 No limit on maximum number of partners Liability of partners/members Generally limited to the amount stated in Mo. A Limited to the extent of their contribution towards LLP Transfer of share/partnership rights in case of death Shares transmitted to legal heirs Legal heirs cannot be partners but can get refund of contributed capital plus share in accumulated profits Transferability of interest Free transfer Transfer subject to the LLP agreement

Company LLP Voting rights As per number of shares held by the members Decided as per LLP agreement Admission as partner/member By buying shares Admitted as per LLP agreement Meetings Board and general meetings are required to be conducted at proper time No such provision Cessation as partner/member By selling the shares As per the LLP agreement OR prior 30 days notice to the LLP Share certificate Ownership is evidenced by share certificates Ownership is evidenced by LLP agreement

Company LLP Maintenance of minutes Meeting minutes are to be recorded May decide to record meeting minutes Audit of accounts Accounts to be audited annually as per The companies act, 2013 Accounts to be audited annually as per The LLP act, 2008 if its turnover exceeds 40 lacs or the capital contribution exceeds 25 lacs in any financial year. Cost of formation High cost specially in Comparatively less cost case of public companies is involved